We often make assumptions daily, such as “the grass is always greener on the other side” or “if you ignore a problem, it will go away.” We know the grass isn’t always greener on the other side and that ignoring a problem won’t make it disappear. There are also common financial assumptions you might be making that could affect your retirement strategy. What are some of them? Let’s discuss some of them.
Could Certain Assumptions Harm Your Retirement Strategy?
Here are three common misconceptions about retirement that relate to your investments and long-term financial plans.
1 – Assuming retirement will last only 10-15 years: When Social Security was created in the 1930s, the average American could anticipate living to age 58 as a man or 62 as a woman. By 2017, life expectancy for the average American had increased to 78.6. This average may believe many retirees could live well into their nineties or beyond.1,2 As a result, assuming you will only need 10 or 15 years’ worth of retirement funds could be a big mistake. For a more conservative plan, add several years to this assumption.
2 – Assuming too little risk: Holding onto your retirement money is undoubtedly important, but so is your retirement income and quality of life. While average inflation rates fluctuate year-to-year, your personal inflation rate may be higher than average (e.g., education, healthcare, etc.). If your retirement assets do not keep up with inflation, you may be unable to meet future spending needs. By planning for higher inflation rates in the future, you can see what steps you may need to take today with your investments to help meet your spending needs many years from now.
3 – Assuming you will be in excellent health: You may have heard the adage, “When you have your health, you have your wealth,” but not everyone is so fortunate as the years pass in retirement. While it’s true that health and lifespans have improved on average, these improvements do not cover every issue that comes with advanced age. Extended-care issues can sap away retirement funds. Findings by the U.S. Department of Health and Human Services offer some perspective: they reported over a quarter of all people who turned 65 between 2015 and 2019 would probably need $100,000 of extended care, while 15% of that same group would be looking at $250,000. 3
You may be in excellent health, and Medicare can help you with the basics. A retirement strategy should include considering paying for a severe medical issue that could demand long-term care. An insurance strategy that can accommodate more extended hospital stays, prescription drug costs, and extended care should also be part of your retirement plan. 3
Remember that good strategies also change over time. As you plan for the future, you may want help removing some of the emotions from making complicated financial decisions. Please call us if you’d like to speak with a financial advisor regarding your retirement. We’re here to help.
About The Goff Financial Group: As a fully independent Registered Investment Advisor, the Goff Financial Group is not owned or controlled by any bank, brokerage firm, mutual fund company or any other company. The company does not receive any fees or commissions from any financial products and works solely for its clients on a fee-only basis. Disclaimer: This material was prepared using third party resources, and does not necessarily represent the current views of The Goff Financial Group which are subject to change without notice. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering tax or legal advice. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as financial, investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This document is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
