Finance
November 15, 2019
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Could assumptions harm your retirement strategy?

By: Ken Weise
April 12, 2019

1 – Assuming retirement will last 10-15 years. 

When Social Security was created in the 1930s, the average American could anticipate living to age 58 as a man or 62 as a woman. By 2017, life expectancy for the average American had increased to 78.6. That said, this average may bely the fact that many retirees could live well into their nineties or beyond.

Assuming you will only need 10- or 15-years’ worth of retirement money could be a big mistake.

2 – Assuming too little risk. 

Holding onto your retirement money is certainly important, but so is your retirement income and quality of life. While overall inflation has been below 3 percent for most of the past 10 years, your personal inflation rate may be higher. In that situation, your dollar gradually buys less and less. If your income doesn’t keep up with inflation – essentially, you end up living on yesterday’s money. 

For this reason, a flexible retirement strategy will likely factor in many situations and scenarios; you cannot plan for every single scenario, but considering many possibilities may give you and your financial professional numerous options down the road.

3 – Assuming you will be in excellent health. While it’s true that we lead healthier lives than our ancestors and that medical science and awareness of fitness and nutrition have improved and extended many American lives, that improvement doesn’t cover every issue that comes with advanced age. Extended-care issues can sap away retirement funds. 

Recent findings by the U.S. Department of Health and Human Services offer some perspective: over a quarter of all people who have turned 65 between 2015-2019 are probably going to need $100,000 of extended care, while 15 percent of that same group is looking at $250,000.

For these reasons, a retirement strategy should include some thinking about paying for extended care of this sort. Yes, Medicare can help you with the basics, but an insurance strategy that can accommodate longer hospital stays and care should also be a part of your thinking. 

Remember that good strategies also change over time and you will probably want some help along the way. Make time to discuss these common assumptions and how to avoid them, with your retirement professional. 

Ken Weise, an LPL Financial Advisor, provided this article. He can be reached at 707-584-6690. Securities offered through LPL Financial. Member FINRA/SIPC. The opinions of this material are for information purposes only.