Is Your Retirement at Risk? 5 Key Threats You Should Know

A recent study found that nearly half of American households could run out of money in retirement if they cease working at 65. Understanding these hidden threats and taking proactive steps to mitigate them can mean the difference between a secure, fulfilling retirement and one filled with financial stress.

In this blog, we’ll uncover five major risks to your retirement that you won’t want to ignore. We will share how tips for strategic planning can help you navigate these challenges, allowing you to retire on your terms with more confidence and peace of mind.

1. Poor Asset Allocation: Finding the Right Balance 

Improper asset allocation is one of the biggest risks to retirement savings. Many assume retirement demands a dramatic shift to conservative investments like bonds or cash equivalents. While reducing risk is wise, going too conservative can also hinder your savings growth, leaving you vulnerable to inflation. 

A recent study was conducted to gain insight into investors’ alternative investments in workplace retirement savings plans. The study revealed solid interest in private assets despite a significant knowledge gap. Among those who expressed interest in private investments, most would take a measured approach with their retirement plan allocations (Schroders):

• 52% would allocate less than 10% to private assets.
• 34% would commit between 10-15%.
• 8% would invest more than 15%.
• 6% are unsure how much they would allocate to private assets.

The ideal asset mix depends on individual goals, time horizon, and risk tolerance. Partnering with a fiduciary advisor can help you find the optimal balance and craft a plan that adapts to market conditions and personal changes. This approach can help keep your portfolio resilient and aligned with long-term goals.

2. Running Into Unexpected Expenses

When unexpected expenses arise, they can significantly affect your long-term financial health, particularly in retirement. These unplanned costs can quickly deplete your retirement savings, whether it’s a medical emergency, family support, or sudden home repairs. Nearly 6 in 10 (59%) U.S. adults feel unprepared for financial emergencies, indicating a widespread need for better financial planning.

This highlights the importance of a well-structured emergency fund. An emergency fund acts as a financial buffer, allowing you to manage surprise expenses without jeopardizing your retirement accounts. Building and maintaining this fund requires careful planning. With professional support, you can establish a cushion that shields your retirement savings from unplanned withdrawals, helping ensure your long-term financial security stays intact.

3. Being Part of the Sandwich Generation

The “Sandwich Generation” refers to adults simultaneously supporting aging parents and children, a responsibility that can strain financial resources and delay retirement goals. Juggling these family obligations often means taking on additional healthcare, education, and living expenses, leaving less room for retirement savings. 

In fact, 90% of Sandwich Generation adults report making a lifestyle change or financial decision because of caregiving responsibilities. Setting boundaries and establishing a structured financial plan is essential for those in this position. Prioritizing retirement savings while supporting family members can help safeguard long-term financial security.

A fiduciary advisor can provide valuable support by developing a balanced plan tailored to your situation. This personalized guidance can make a significant difference in helping maintain financial stability for both your loved ones and your future.

4. Long-Term Care Expenses: Protecting Against Rising Healthcare Costs

Long-term care remains a significant concern for retirees, with the U.S. Department of Health and Human Services estimating that 70% of people turning 65 will need some form of long-term care in their lifetime. Unfortunately, Medicare provides limited coverage for these services, and long-term care insurance can be costly. Planning for these potential expenses is crucial to helping safeguard your retirement savings.

The 2024 American Association for Long-Term Care Insurance (AALTCI) annual Price Index survey shows that the average annual premium for a $165,000 benefit policy without inflation protection is $950 for a single 55-year-old male and $1,500 for a single 55-year-old female. For a 55-year-old couple, the average combined annual premium reaches $2,080. These figures highlight the financial impact of securing long-term care coverage and the importance of including these costs in retirement planning.

A fiduciary advisor can help you navigate various funding options for long-term care, such as health savings accounts (HSAs), hybrid insurance policies, and setting aside dedicated assets within your retirement plan. With a fiduciary’s guidance, you’ll have access to strategies designed in your best interest, helping ensure these costs won’t drain your retirement funds and that you’re better prepared for the future.

5. Ignoring the Impact of Inflation 

One of the most common yet underestimated threats to retirement savings is inflation. Over time, inflation erodes the purchasing power of your money, meaning that the same dollar buys less and less each year. For example, if inflation averages just 3% annually, in 20 years, you’ll need nearly twice as much money to maintain the same standard of living. For retirees, this steady cost increase can severely strain savings, particularly when living on a fixed income.

Ignoring inflation’s impact on retirement planning can lead to a financial shortfall when it matters most. Understanding the long-term impact and incorporating strategies to help protect your purchasing power is essential. Working alongside a fiduciary can help you build a portfolio that includes inflation-resistant assets aimed at outpacing inflation over time. By planning and adjusting your portfolio as needed, you can retain the ability to meet rising costs without compromising your financial security in retirement.

Planning for a Secure Retirement with Agemy Financial Strategies

A secure retirement doesn’t happen by chance; it requires proactive planning and a clear understanding of the risks that lie ahead. Andrew Agemy, Owner and CEO of Agemy Financial Strategies, emphasizes the importance of a client-focused approach. “Our focus is on serving our clients with an educational process and listening with our hearts, not just our ears. This empowers our clients to make and realize their own solid financial decisions and allows them to remain in control.”

Here is how our team can help you navigate these challenges with confidence:

• Customized Plans: Every individual has unique retirement goals and concerns. We work closely with you to develop a plan tailored to your financial situation.
• Comprehensive Risk Management: From asset allocation to healthcare costs, we address each aspect of retirement to help ensure you’re prepared for potential risks.
• Ongoing Support: Retirement planning is an evolving journey. As market conditions and personal circumstances change, we adjust your strategy to align with your goals.

With Agemy Financial Strategies by your side, you can build a retirement plan designed to empower you and support a financially secure future.

Final Thoughts

Understanding and addressing these five critical retirement risks can make a significant difference in securing a comfortable, worry-free future. By taking proactive steps to help protect your savings and working with a knowledgeable fiduciary advisor, you can be better prepared to navigate unexpected challenges and achieve your retirement goals.

At Agemy Financial Strategies, we’re committed to helping you build a retirement plan that aligns with your vision and financial needs. With our personalized approach, you can plan confidently, knowing you’re well-prepared for the future.

Contact us today to start planning a retirement that fulfills your dreams and provides peace of mind.

Frequently Asked Questions

Q: How can I be sure my retirement plan is on track?
A: Regularly reviewing your retirement plan is essential to staying on course. At Agemy Financial Strategies, we offer ongoing support and periodic reviews to help your plan adapt to changes in market conditions, tax laws, and your personal financial situation. These reviews help you stay aligned with your long-term goals.

Q: What if I don’t know how much I’ll need for retirement?
A: Determining your retirement income needs is a common challenge. Our team at Agemy Financial Strategies helps you estimate these needs by examining your current expenses, desired lifestyle, and potential future costs like healthcare and long-term care. This process gives you a clearer picture of the savings required to maintain your lifestyle.

Q: How do you approach healthcare and long-term care costs?

A: Healthcare and long-term care expenses can be significant in retirement. We explore various options with you, including health savings accounts (HSAs), long-term care insurance, and retirement assets earmarked for medical needs. Planning for these costs in advance helps reduce their impact on your savings.

Q: How does Agemy Financial Strategies help manage inflation risks?

A: Inflation can erode the purchasing power of your savings over time. To combat this, we build inflation-resistant elements into your portfolio, such as stocks, bonds, and other investments that aim to outpace inflation. This approach helps protect your wealth and maintain your standard of living in retirement.

Q: What is the advantage of working with a fiduciary advisor?

A: As fiduciary advisors, we are legally and ethically committed to putting your best interests first. This means that all our recommendations are based solely on what’s best for you, with no conflicts of interest. Our goal is to provide transparent, objective guidance to help you achieve a secure and fulfilling retirement.

Disclaimer: The information provided in this blog is for educational purposes only and should not be taken as specific retirement or investment advice. Retirement and investment strategies should be tailored to each individual’s financial situation, goals, and risk tolerance. Before making any changes to your retirement investments, consult our qualified advisors to ensure these decisions align with your personal retirement objectives.