We all worry about our retirement investments declining in value, outliving our money, and inflation reducing our purchasing power. Not to mention that we could develop a health problem or have to retire earlier than we planned due to an unexpected event in life that may happen. Considering these issues that may arise, listed below are five retirement risks explained in more detail.
Below listed are top five retirement risks.
1. Increased longevity
Statistics are showing that longevity is increasing as well as costs associated with it. Studies are showing that seniors are outliving their retirements as fully 30 percent of women and 20 percent of men can expect to reach age 90. Thus, there is a high likelihood that relatively healthy 65-year-olds may live past 90. However, Social Security as the best protection against outliving your assets may no longer be there when you retire while you will still want to maintain your standard of living. The possibility of not having adequate income to pay for your living expenses may place you at the risk of falling below the poverty line.
2. Rising food costs and health care
Food prices are on the rise globally and you can just imagine how much the food may cost in twenty years when you may want to retire. It takes about 20 dollars a day per average person to get enough food to live on. If you perform a calculation 20 dollars a day for 20 years will equal about $146,000 dollars without adjustments for inflation. Health care expenses are rising much more rapidly than general inflation. You will more likely than not incur increased health care costs when you retire as you will no longer have health coverage as when you were working. Thus, you will have to purchase your own health coverage that will be even more costly when you retire.
3. Unexpected events in life
Retirement may happen while you’re busy making other plans in life. Studies are showing that 47 percent of current retirees say they retired sooner than they originally planned to. Life always finds ways to surprise us with unexpected events when we least expect them. Life is not a straight but a curvy road in life. You could always develop a health problem or be forced into retirement earlier than you planned. We are living in uncertain times where are jobs are no longer guaranteed. What if you loose your job or have a serious medical emergency in your family?
4. Rising inflation costs
Studies are showing that retirement can be risky business nowadays when inflation rates are going up. Inflation rates continue to rise due to economic recession and weakened value of our dollar. If your money does not grow faster than inflation, it loses its value. Many retirees and retirees to be are afraid that their retirement savings may deflate significantly in twenty years due to its inability to keep pace with inflation. As this trend is expected to rise, inflation represents a big risk factor for current and future retirees especially for expenditures that we can not deal without such as food and health care.
5. Social security is no longer secure
The future of social security seems to be uncertain under the current weight of the recession. We may be faced with a situation where social security will start paying out more in benefits than it collects in taxes in 2016. Thus, the assumption is that the social security fund will be depleted by 2037 as we have a smaller number of workers supporting a larger group of elderly dependents. Despite contributing to this fund, it is not certain that we will receive our full share of this fund.
All these factors listed above make us vulnerable to falling below poverty line once we retire. If you still want to enjoy a secure retirement, you should maximize your savings and investments and reduce your top five retirement risks.