No matter how squared away you think your financial strategy is, it’s probably not a bad idea to have backup you can pivot to if circumstances require it. For more information, contact our Wausau WI retirement team today.
A Kiplinger article, You Need a Retirement Contingency Plan: Five Steps to Get It Done has some excellent insights about how you may be able to prepare your assets for future economic uncertainty and personal change.
Build an emergency fund
The first of the five steps is to create an emergency fund — which is something most financial services professionals stress the importance of.
Though you likely know how important an emergency fund can be, data suggests not enough people actually have one. The article cites a Bankrate study that determined more than one out of four people have no emergency fund at all. Additionally, about 59% of Americans express discomfort with their amount of emergency savings.
The money that you dedicate to your emergency fund should be held in the event you need it to address unexpected expenses like medical emergencies, home and car repairs, or a sudden job loss. Many financial services professionals recommend that you always have at least six months of living expenses in your emergency fund.
Diversify your portfolio
First, make sure your investment portfolio is diversified. By balancing your asset allocation, you may position yourself to better manage potential risk
The article adds that portfolio balance is about more than simply investing in stocks and bonds. Investing in mutual funds, ETFs, and real estate can help your overall portfolio. Additionally, putting cash into a high-yield savings account and opening an IRA may also be beneficial.
However, it isn’t enough to just diversify your investments, you should also rebalance those allocations over time because it may help you better manage risk and mitigate some financial loss.
Get ready for healthcare costs
Next, you should prepare for future healthcare costs. As many of you surely already know, the older you get, the more your healthcare is probably going to cost. The article references a study from the Centers for Disease Control that determined the current life expectancy for American women is 80 and is 75 for American men — which means it may be wise to plan for a long retirement.
While Medicare is an essential part of retirement for many Americans, it may also be a prudent move to discuss long-term care insurance with your financial services professional. This type of insurance may help you address things like in-home care as well as nursing home and assisted living facility services.
Also, annuities with long-term care benefits and life insurance with a long-term care rider may be two more things to discuss with your financial services professional. And as you enter your middle years and are heading closer to retirement, continue prioritizing your health — eat well, exercise regularly, and get enough sleep — taking better care of your health is a way to also take care of your bank account.
Additional income
Another way to buffer your retirement against potential future economic volatility is to create additional income streams. Because traditional pensions are going the way of the dinosaurs and Social Security’s future is seemingly a permanent political football, it may be important to work with your financial services professional to build additional income.
Don’t forget about inflation Lastly, it’s important to remember that future inflation is very likely. As you age and enter retirement, prices will go up — whether slowly due to normal inflation, or rapidly because of unexpectedly high inflation — so be sure to include inflation when considering your future income needs.