Watch Out for These Retirement Pitfalls

Once you retire, you will be living on a fixed income for the rest of your life. If you’ve planned well, you will hopefully enjoy a roomy budget and a comfortable retir ement. But even if your retirement income today matches well with your current expenses, what about the future? Make sure you have carefully prepared for these four possible pitfalls of retirement.

Stock market troubles. Favorable market conditions may play a big role in helping you build a solid retirement fund. But it’s never a good idea to bet heavily on these favorable conditions lasting forever. Some economists believe we are now reaching a peak in the stock market, and that a decline is on the other side. No one can predict with any certainty when, or if, a decline will happen. But it’s best to be prepared for less favorable stock market conditions once you reach retirement.

A rise in interest rates. We’ve been enjoying historically low interest rates, and that makes bond investors happy. But if and when interest rates rise, bond values can go down. There’s no need to panic, because interest rates generally don’t spike suddenly. Instead, we would most likely notice a gradual increase. But if you’re heavily invested in bonds, this is something to consider before you retire.

Inflation. Inflation is slow, and we barely noticed the rise in prices from one year to the next. But with a typical retirement lasting 20 years or more, you can bet you will notice a big difference in your cost of living by the end of your retirement years. Keep in mind that your retirement budget today may not be realistic in ten or fifteen years.

Other risks. Depending upon your individual situation, you may face other risks in retirement. For example, the real estate market can be unpredictable. How much of your retirement plan is based off of equity in your house? What if you can’t sell it when needed? Another huge unknown factor is your health. With the cost of health care skyrocketing, the state of your health can make a large impact on your retirement budget. This is particularly true if you need long-term nursing care at some point.

Since one in five of us will live past age 90, it’s a good idea to plan for 20 to 30 years of retirement. There’s no need to panic, but keep in mind that the future of the economy is uncertain for all of us. Plan carefully with your financial advisor, and make sure you’re really ready to retire before you quit working.

14490 – 2015/5/13