Four Major Threats To Retirement Savings
Budgeting for retirement can be a stressful experience, but something people should do throughout their adult life. However, there is still the risk that money will run out, as numerous factors pose a risk to a person’s nest egg.
Risk No. 1 – Lack of emergency savings
Unexpected expenses are a problem when people earn a full-time salary, and become an even greater issue after leaving the workforce. Failing to have emergency savings could increase the chances that a retiree needs to draw more money from their nest egg than they had hoped. For example, if their car breaks down, a safety blanket would provide them with the necessary funds to cover the cost.
Risk No. 2 – Retiree and their adult kids
When most people retire, children are at an age when they are able to support themselves financially. But, that doesn’t mean a son or daughter won’t go through some struggles and may need to rely on their parents for some money. For instance, many Americans may have turned to their elders for funds when they were laid off during the recession. Any such instance would pose a major threat to retirement savings, as parents may find it difficult to turn down their child’s call for help.
Risk No. 3 – Medical expenses
At the age of retirement, most people are at the time in their lives when health risks are the greatest. For this reason, medical expenses could be a big threat to nest eggs. According to Yahoo Finance, a couple who is retired for 17 years would spend approximately $250,000 on healthcare costs if they had Medicare. Those who are unable to take advantage of this benefit would spend much more. Knowing this, it would be wise to set aside some extra cash for medical expenses when saving for retirement.
Risk No. 4 – Taxes
Just because people are no longer working full-time doesn’t mean they don’t have to worry about paying the government. In fact, withdrawals from 401(k)s and Roth IRAs, among other retirement accounts, will be subject to income taxes. When planning a budget for the years after leaving the workforce for good, it is extremely important to account for these costs, as failing to do so could lead people to believe they have more money than they actually do.
April Lewis-Parks has more than 15 years of experience in the financial sector, she is a certified financial counselor, and a consumer affairs advocate. As the director of education and public relations for Consolidated Credit she is dedicated to generating awareness about personal finance issues and acts as their consumer affairs advocate. As host the of MissMoneyBee.com, she promotes financial education and offers timely and informative personal finance articles to educate the public. April’s promotional efforts can be seen in past issues of the New York Times, Washington Post, Newsday, Consumer Reports, the Business Journals, Money Magazine, Glamour, Cosmopolitan, Family Circle, among others. Connect with April on Google+.