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These tips will help you learn how to protect your retirement savings so that you can feel comfortable when retiring.
It’s never too early to start planning for your retirement and it’s also important to learn how to protect your retirement savings.
When you retire you want to be able to enjoy your retirement and not have to worry about money.
How to Protect Your Retirement Savings
Key Steps to Take to Protect Your Retirement
- Have an emergency fund.
- Reevaluate your financial goals often.
- Plan for health care costs.
- Plan to live longer.
- Be prepared for inflation.
Following these steps can help you make sure you can live comfortably when you retire.
Have an Emergency Fund
Having an emergency fund is important even long before retirement. Emergencies happen to everyone, from an unexpected hospital bill to a home repair, and you don’t want to need to dip into your retirement savings.
Build up what you can with the end goal being enough money to cover basic living expenses for six months or more. This can sound like a lot but just start building it as soon as possible.
Taking from your retirement should always be the last resort as there are generally tax consequences and penalties for taking from your retirement before age 59 1/2.
Reevaluate Your Financial Goals Often
Ideally about once a year you should take a look at your current financial situation and your financial goals. As your needs change and your income possibly changes you will need to look at making changes to how you are spending and saving money.
This is also a good time to look at any investments you currently have and see if changes need to be made.
Plan for Health Care Costs
Health care costs have historically risen faster than general inflation which makes planning for health care costs even more important for anyone thinking about retirement.
Fidelity estimates that an average retired couple age 65 in May 2022 needs approximately $315,000 (after tax) saved to cover health care expenses in retirement.
This also doesn’t include the cost for long-term care which can be very expensive. The US Department of Health and Human Services has reported that about 60% of those aged 65 and older will required some time of long-term health care.
The average cost of a semiprivate room in a nursing home is about $94,900 per year. These costs can add up very fast. Considering long-term-care insurance is one way to protect yourself, but it’s not right for everyone so do your research first.
Plan to Live Longer
Life expectancy had be on the rise for many years due to medical advances. And it’s a good idea to plan for this to happen again, even though currently due to the pandemic and other factors life expectancy is falling.
There is a very real possibility you could need 30 or more years of retirement income. And the average Social Security benefits for a retired worker is currently around $1,514 a month. It’s very likely that alone this will not cover all of your needs.
You should be considering income streams for your retirement. Things like retirement annuities, which is an insurance product that provide you with a guaranteed income for life.
Be Prepared for Inflation
These days all of us are feeling the pressure from inflation. It takes away purchasing power of your money over time and can have a big impact on a retiree’s purchase power.
Social Security, certain pension plans, and annuities can help you keep up with inflation with annual cost-of-living adjustments. This is something to keep in mind when choosing investments.
The best thing you can do when it comes to retirement is plan early. The last thing you want is to reach retirement age but be unable to retire because of lack of planning. If you are unsure the best ways to plan, reach out to a retirement expert to help you make a plan.