The great thing about retirement planning is that it can help you feel secure and ready for what’s next. The problem? It’s just a guess at best.
You have to make assumptions to even begin building a solid retirement plan. How long will I live? What will I pay in taxes? Housing? Healthcare?
All of these are unknowns, while the most easily understood part — your retirement income — is subject to its own stresses and potential miscalculations.
Most people respond to such a mix of unknowable outcomes by throwing up their hands and giving up. But you can, and should, do better than that. Your future, retired self is counting on you to get things at least halfway right.
To avoid the worst of the potential financial pain, consider these five retirement busters and how you will face up to each challenge:
1. Care…for your own parents
Elderly parents still in your life? Consider yourself blessed. Do not, however, discount the possibility that mom or dad made a long-term healthcare plan, penciled in “the kids will take care of me” and forgot to tell you.
Talk with your aging parents about any life insurance policies they might hold, money set aside for health care and other resources you might have to administer on their behalf. A frank conservation is important.
2. Financial help for your kids
The short answer here is a loving and firm “no.” Your adult children should be fully flying on their own, not relying on your checking account to bail them out at tax time, help them start a small business or cover private schools for their kids.
If you are a person of means, there are advantages to passing along wealth while living. A good CPA can help you realize the best path forward. Otherwise, remember: They can borrow to finance their lifestyles. You cannot borrow to pay for retirement.
3. Long-term care for you
A good time to research long-term care options is in your mid-50s. If you wait too long, policies can become exorbitantly costly or unavailable. Some insurance polices, too, can be converted to pay benefits while you are alive.
If neither of these options is workable, consider that an assisted living facility today costs $3,500 a month, according to a report by insurer Genworth, rising by 1.45% from last year.
4. Long-lasting debts
By far the most manageable problem, debts should be paid down completely before your retirement date, hopeful several years before. You can compound your wealth by putting off retirement and continuing to work, but you are running up a slippery slope if you expect to work, save and pay off a house and credit-card debts. Get it down to zero soon.
5. Inflation bites
If inflation remains steady at its historical rate, you can expect prices to double in 20 years. That alone should be plenty of motivation to make sure your investments keep ahead of inflation while keeping risk at a minimum.