Evaluating the Strength of Your Retirement Strategy

Contemplating worst-case scenarios may not be pleasant, but it is an essential step when planning for retirement. Before embarking on this significant phase of life, delving into the numbers to ensure your financial strategy can withstand unforeseen challenges is crucial. Here’s why stress-testing your retirement plan is a necessity:

Assessing Longevity: Can Your Retirement Savings Last Till Age 90?

Living longer is a positive prospect, but outliving your savings can pose a severe financial threat. Extended life expectancy brings increased costs, particularly related to potential health issues and long-term care expenses. If projections indicate your retirement savings may deplete before reaching age 90, prompt recalibration of your retirement plan is essential.

Addressing Income Gaps: The Impact of Spousal Loss on Household Finances

For married couples entering retirement, the potential loss of a spouse can significantly affect household income. The survivor of a federal retiree may face a reduction of up to half of their deceased spouse’s annuity. Additionally, Social Security income for FERS participants could decline by as much as 50%, leading to increased income tax burdens due to a shift from joint to individual filing. Identifying income gaps in the event of a spouse’s passing is crucial, necessitating adjustments to the retirement plan beforehand.

Incorporating Long-Term Care Costs: An Essential Component in Retirement Planning

Long-term care, including assistance with daily activities, is a critical consideration often overlooked. Uncovered by health insurance or Medicare, this custodial care is provided in assisted living facilities and nursing homes. Research indicates that 70% of adults aged 65 and older will require long-term care, with associated costs averaging thousands of dollars per month. Without Long-Term Care Insurance, these expenses become significant out-of-pocket obligations.

Remember, preparing for the unexpected ensures that your retirement plan is robust and capable of withstanding potential challenges. Seeking guidance from an FRC® trained advisor can provide valuable insights and assist in refining your plan to better withstand unforeseen financial stresses.