Post-Retirement Financial Risks You Must Avoid


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When making retirement plans, you may not be able to control the unexpected risks like a market downturn or unexpectedly high inflation rates. But, with sound advice from an online financial advisor, you can limit the impact of these risks over your finances.

You can manage these risks with the right strategy. Consider the following financial risks to your post-retirement portfolio and learn how to avoid them.

Change in the Inflation Rates

Inflation is a significant factor that affects your spending capabilities over time. During the retirement phase, your finances are more vulnerable to this risk. Even in a period of 10 years, the inflation rate of 2% can reduce your asset value considerably.

For example, if you have assets valued at $ 100,000, a 2% inflation rate can bring it down to $ 82,035. Now, consider this impact over 25 years. It is the expected length of your retirement, and your assets can fall flat up to $ 60,953 over this period.

For avoiding this risk, you can invest in sustainable instruments that grow with inflation. Real estate, stocks, and government bonds are some instruments where returns can vary according to the current inflation rates.

Change in the Interest Rates

If the interest rates are low, it can reduce the retirement income as well. Low-interest rates result in reduced growth rates for assets and savings. You may need to save more for accumulating sufficient funds for your retirements.

If long-term interest rates fall, the annuities also yield lesser income. This scenario is quite risky for people who depend on their savings during the post-retirement age.

At the same time, high-interest rates can negatively impact the value of stocks and bonds. As a result, they affect the disposable income of retirees. So, depending on your chosen investment plans accommodate the changing interest rates to minimize their negative impact on your income.

An online financial advisor can help to choose the right type of instruments that not only manage the interest rates but also minimize your tax liabilities.

Rising Costs of Medical Treatments

Healthcare risks are a severe concern for the retirees. It would help if you planned systematically for reducing these risks. According to a recent study, nearly 70% of Americans above the age of 65 need some medical care. It may include staying at a care facility, cost of medications, and home care assistance.

Even without these expenses, the cost of managing your health increases with your age. Here, you can mitigate the risk by planning early and thinking about long-term health goals.

Long-term insurance can help if you buy it at the right age. Remember, the cost of insurance also increases with your age. Another option is to invest in health savings accounts or HSA to pay for qualified medical expenses. It is a tax-deductible contribution that grows with time.

Other risks may include the stock market declines where your investments can take a beating. Choose the instruments that offer steady income and never outlive your savings to overcome these risks.

Whatever choices you make, always seek help from experienced and qualified financial advisors to avoid financial risks to your post-retirement portfolio.

Jeff Campbell

Jeff Campbell is a husband, father, martial artist, budget-master, Disney-addict, musician, and recovering foodie having spent over 2 decades as a leader for Whole Foods Market. Click to learn more about me

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