The Hidden Peril of Retirement: How Under-Planning Can Impact Your Lifestyle

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Saving for an income later in life is not all moonshine and roses. Things happen along the way that can influence your retirement income. Stats already show that two-thirds of people will have a shortfall of money later in life. To add insult to injury, there are other factors to consider that could potentially reduce your retirement income even more.

These are often forgotten about when it comes to financial planning. Your financial advisor can help with valuable advice to make sure your retirement money doesn’t end up short.

What Factors Could Cause a Retirement Shortfall?

There could be unforeseen market crashes – This is not referring to historical market fluctuations, but major global occurrences that could cause markets to crash, like the unforeseen pandemic recently that made many lose millions or a war that might cause global economic instability.
Possibility of state pensions disappearing or extending the retirement age – We already know that many countries are slowly increasing their prescribed state pension ages to counteract the strain on state resources caused by the increase in longevity of pensioners. Many predict that state pensions are unsustainable and might be a thing of the past in years to come. Try not to factor in your state pension when planning. Rather use it for retirement luxuries such as vacations or rainy-day savings for when you run short. You might also have to retire later as the pension age increases.
Factor in cyclical market movement – History has shown that markets move in cycles of highs and lows but ultimately always correct themselves. Be aware of what cycle the markets are in when you retire, as you may lose money in a low cycle. Choosing the right time to retire is everything. Also, never plan your retirement based on favourable returns of markets. It is prudent to work on a lower rate of return so as to avoid a shortfall.
Once-off retirement spending – Remember that you will have once-off expenses at retirement that you need to factor into your planning. These expenses could chisel away at your monthly income if you do not plan for them. For example, buying a new car or a holiday home, major renovations such as replacing a roof, or even that around-the-world trip you’ve always wanted to take.
Unforeseen expenses – As we know from experience, there are always unforeseen expenses that eat at our income, like major medical bills or a major car repair etc. will you be able to afford this in retirement?
Medical care – The reality is that the older we get, the more medical care we need. Private health insurance could take a chunk of your disposable retirement income. Even if you are fortunate to have state medical care, there will always be extra medical costs that are not covered, e.g. equipment to aid mobility, renovations to install wheelchair access, and special help at home.

There are no guarantees when it comes to retirement, so making savings contributions as large as you can manage, can help overcome some of these retirement challenges. Your financial advisor is best qualified to include all these challenges in your retirement planning so that you are not caught unawares or have a shortfall when you retire.

Please note the above is for educational purposes only and does not constitute advice. You should always contact your deVere advisor for a personal consultation.

* No liability can be accepted for any actions taken or refrained from being taken as a result of reading the above.