Retirement planning

The Three Most Pressing Fears in Retirement

The most significant fear most people have as they plan for their retirement is outliving their income. Though seven in ten workers say they have confidence in the planning they’ve done to live comfortably in retirement, many may not be prepared for certain risks that could threaten their lifetime income sufficiency.

The Risk of a Long-Term Care Event

Recent statistics reveal that more than two out of five Americans will require long-term care at some point in their lives, and the number increases to seven out of ten after the age of 65. Chances are, paying for long-term care will be a critical issue for most retirees.

In many cases, family members are willing and able to provide care at home. However, many situations reach a point where it either becomes impractical or too emotionally draining for the family caregiver. They need to turn to some kind of professional long-term care services eventually.

There is no getting around the staggering cost of long-term care, but there are ways to mitigate the financial impact it can have. Whether the best solution is to accumulate the extra capital to cover the cost or transfer the risk to an insurance company, or some combination of the two, the most valuable asset we have is time. The best use of your time right now is to have a serious discussion about addressing the certainty of long-term care and finding the best solution to pay for it.

Inflation Risk

Until recently, inflation was just an afterthought in retirement planning because the rate has been so low. In the last year, we’ve seen the inflation rate surge to levels not seen in decades to where it is becoming a real threat to our purchasing power. That can be especially damaging to retirees’ financial security in their later years.

Whether this inflation surge is transitory, as some economists believe, or a more permanent increase that could last several years, it should be a wake-up call for people planning their retirement. However, we don’t need inflation to surge to 10% to understand the impact on purchasing power over time. Even at an average rate of 3% inflation, your purchasing power can decrease by 80%, where a $100 bag of groceries today would cost $180 in 20 years.  Inflation can also wreak havoc on your returns, which can be especially devastating on fixed-income portfolios. 

Inflation at any level is almost a certainty. We can expect it, and we can plan for it. But, to mitigate its impact, time is of the essence.

Social Security Solvency

For many retirees, their Social Security benefits will play an increasing role in producing lifetime income sufficiency. Social Security was created as an insurance benefit to prevent retirees from living in poverty—back when life expectancy was just 63 years old. No one expected life expectancy to expand by 20 years at a time when fewer workers are contributing to Social Security. 

Congress has taken several steps along the way to increase the solvency of Social Security, such as increasing the full retirement age, raising the wage limit for contributions, and increasing FICA taxes. There are still more levers the government can pull to stretch it further. However, for anyone now on the glide path to retirement (age 55 or older), there is a low risk of any of these changes affecting your benefits.

It’s OK to have concerns about retirement. That’s why it’s essential to do the proper planning while time is still on your side. Planning for a secure retirement is about focusing on what you can control and putting the right strategies in place to mitigate your risks.

Did you know Alpine Bank has a wealth management division? Learn more about our team here.

*Products of our Wealth Management service are not FDIC insured, may lose value and are not bank guaranteed.

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Alpine Bank Staff

Alpine Bank is an independent, employee-owned organization with headquarters in Glenwood Springs and banking offices across Colorado’s Western Slope, mountains and Front Range.

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