Retirement often seems like an end goal, when in reality, it should be looked at as a completely new beginning. They key to a happy retirement, according to financial expert D. Paterson Cope, is to first understand the challenges of post-work life.
There are many challenges that you’re likely to face in retirement. Here are five of the biggest ones, and how to overcome them.
1. Having Your Money Last
One of the biggest challenges of saving for retirement is that it’s impossible to predict how many years you’ll be spending in post-work life. The Society of Actuaries says that men who are 50 years old today have a 33% chance to live to the age of 90. Women who are the same age have a 50% chance to live that long.
Depending on when you stop working, then, you could spend nearly as many years retired as you did working — if not more. This makes generating income during retirement important. The way to do this is to put your money in safe and liquid investments with low risk and consistent returns.
You may also decide to work a few additional years than originally planned to give yourself an extra financial cushion.
2. Handling Cashflow
Retirees need to adjust to a new way of living, in more ways than one. Many relied on a regular paycheck when they were working. In retirement, that completely changes.
Even if you have plenty of money to retire comfortably, you’ll need to adjust to a new schedule of cashflow. Figuring out how to time distributions with Social Security payments and other sources of income can be challenging.
A good idea is to start figuring out this schedule a year or two before you retire, so that you can be prepared for the new cashflow once you stop working.
3. Planning for Health Care
Health care is one of the most expensive parts about retirement. Aside from increased costs for doctors’ appointments and medications, many people require some form of long-term health care at some point in their lives.
This long-term care can be quite expensive, but you can plan for it. One option is to cover the costs with your retirement income. If that’s simply too much — and it is for many people — you could purchase long-term care insurance. That is also expensive, but it could save you money in the long run.
If you aren’t able to afford this on your own, you may be forced to rely on care that’s funded by the government, which isn’t the ideal situation, as you’d have to divest all personal assets that you have
4. Adjusting for Inflation
As many retirees today are finding out, inflation can be a killer for retirement savings. Even low expected inflation of 2% annually could result in your purchasing power being cut nearly in half over a 30-year period.
The famous saying is that the only two certainties in life are death and taxes. But, maybe inflation should be added to that as well.
There are many ways to overcome this challenge. One is to save more money than you think you need. Another is to invest in certain funds that perform well during inflation to compensate for your losses. Another still is to reduce your debt as much as possible to help you shoulder the extra costs.
5. Estate Planning
Finally, estate planning is a major concern that retirees have, as they want to leave a good legacy for their beneficiaries when they pass. Financial expert D. Paterson Cope says that there are many things to consider in regard to estate planning, and the earlier you start this planning, the better.
Estate planning doesn’t have to wait until retirement. In fact, you can — and should — make it an integral part of your retirement plan. This allows you to worry about one less thing as you’re enjoying your post-work years.
About D. Paterson Cope
D. Paterson Cope, CFP® is the founder and CEO of Cope Private Wealth, a financial planning and wealth management firm specializing in assisting retirees and people who are about to retire. D. Paterson Cope has been providing financial advice for more than 30 years. He first earned the designation of Certified Financial Planner (CFP) in 1997. When he isn’t working, he enjoys spending time with his wife, Jennifer Miree Cope, and the rest of his family in Mountain Brook.