Wednesday , 21 February 2024

The 5 Biggest Financial Risks Retirees Face

…While there are many risks that face retirees, new research suggests older Americans often underestimate the biggest and most likely problems they’ll encounter…Here’s a look at the five biggest risks retirees face — as well as some advice for minimizing those risks.

1. Outliving your money in retirement

…While it’s great news that Americans are living longer, the extra years come at a price. Americans often underestimate how long they’ll live — and therefore also underestimate how much money they’ll need in retirement…To get some extra mileage out of Social Security benefits, retirement experts, such as Suze Orman, financial advisor and author,.. often recommend older Americans delay their retirement until age 70, if possible, saying that “The payoff from waiting until age 70 to start your Social Security benefit is the best investment you can make for your retirement.”

2. Higher-than-expected medical costs

…Recent research from Fidelity Investments shows that the average 65-year-old retired couple can now expect to pay $315,000 on medical expenses in retirement…and the vast majority of Americans report they aren’t prepared to cover the skyrocketing costs.

Experts often recommend long-term care insurance — preferably purchased long before you need it, in your 50s — as a way to help defray medical costs later in life, as can health savings accounts (HSAs) thanks to their major tax perks.

3. Stock market volatility

…Market swings stress most investors out, and for those approaching retirement, it can induce panic. Given that stocks officially entered a bear market in June, these fears have only heightened lately and kicking off your retirement during a bear market isn’t ideal, with experts recommending delaying one’s retirement a year or even two, if possible, to increase one’s Social Security benefits while allowing for markets to recover. Whatever you do, don’t throw in the towel by cashing out your investments…

4. Family expenses

Aside from all the financial snafus you could personally face in retirement, your family will likely have unforeseen emergencies and expenses that you’ll need to cover. For example,

  • if you and your spouse were expecting to work throughout retirement to cover costs, that plan could easily be upended if one of you were to fall chronically ill — or worse. The Social Security Administration does provide 100% survivor benefits if you are at full retirement age, but it may not be enough to cover your specific situation — especially if your spouse was working.
  • Likewise, a divorce later in life could completely alter the course of your retirement.

While it’s difficult to plan for all these possibilities, you can do your due diligence and set up aforementioned long-term care insurance, life insurance and possibly even a postnuptial agreement (one made after you are married) to protect your finances.

5. Social Security policy changes

Nearly 50 million Americans collect monthly retirement benefits from the Social Security Administration, however, due in part to seismic demographic shifts spurred by the retirement of baby boomers, the SSA is on pace to become insolvent in the 2030s. High inflation now, which results in boosted monthly Social Security benefits in the short-term, could cause insolvency to come sooner. While insolvency is a real possibility, and retirement benefits could be cut 20% or more,…Congress could, of course, act to keep retirement benefits fully funded…

The above version of the original article by Adam Hardy ( has been edited ([ ]), abridged (…) and reformatted for the sake of clarity and brevity to provide the reader with a faster and easier read.