Many Americans spend their professional lives working toward retirement. Careful planning, saving, and budgeting can go awry if something unexpected (like a stock market crash, or you lose your job) happens. So, how do you prepare for the unexpected? While you can never prepare for everything, you can reduce your retirement risk.
4 Ways to Reduce Retirement Risk
Plan for the Inevitable
If you or your spouse have a pension that you plan to use to help fund your retirement, consider adding an additional retirement account, like a Roth IRA to your portfolio. It’s a wise idea to develop multiple streams of income during retirement so you aren’t relying on one source. Why? Because your spouse may not benefit from a pension fund after your death. If they depend on this to cover part or all monthly expenses, losing it will be detrimental to their financial security in retirement.
Plan for Market Volatility
Are you taking advantage of a company-sponsored 401(k) program? Great! You’ve likely heard about diversifying your assets. What does that mean? Diversification means you don’t have all your eggs in one basket. When you diversify your portfolio, you have stocks, bonds and index funds in both foreign and domestic holdings. You have money in multiple industries (like real estate, tech and energy funds). You can’t predict and plan for every market fluctuation, but you put your money in a wide variety of investments that could insulate you from major losses and reduce your financial risk. Have questions? A certified financial advisor will be able to help ensure you have a solid plan in place.
Look Out for Future Financial Risk
As you age, you tend to move away from putting money in higher-risk investments and instead put money into more conservative holdings. Why? Greater risk can lead to greater rewards — or losses. As you age, you won’t have as much time to make up for potential losses. Shifting your strategy as you mature tends to insulate you from potential market volatility. When you are investing in the market, remember that you are playing a long game and not day trading. Discuss a long-term strategy with your financial advisor.
Plan for Medical Expenses
When you turn 65, you are eligible to participate in government-sponsored Medicare programs. Medicare traditionally covers a portion of healthcare charges for enrollees, so enrollees generally need to cover remaining costs with supplemental insurance or out of pocket expenses. So, what can you do to prepare? Consider looking into supplemental insurance programs that will balance your out-of-pocket expenses with comprehensive coverage options.
Set Yourself Up for Retirement Success
Retirement can be one of the greatest times in your life. Don’t spend it worrying about whether you are financially secure. Plan now, even if it means planning for the unknown. Need help? Contact your Farm Bureau agent or advisor for assistance, and to put a solid plan in place.