5 Uncomfortable Truths About Retirement You Must Understand and Prepare For
When you think about retirement, are you picturing Paris, golden beaches, grandkids, tee times, volunteer work, and long walks with your spouse?
Great! Everyone approaching retirement age should have a vision that's inspiring, rewarding, and exciting to plan for.
But a truly comprehensive financial plan isn't just about achieving goals. It's also about meeting challenges, both the ones we can predict and the ones that life throws at all of us.
At Keen Wealth, we believe it's essential to get out in front of retirement's uncomfortable truths as early as possible. Just about every retiree will need to prepare for these five realities.
1. You might experience multiple market downturns.
Based on market history, it's likely that a 25-year retirement will include at least four significant downturns. For example, a senior who retired in 1999 could look back today on how their financial plan weathered the Dot-com bubble, 9/11, the Great Recession, and the pandemic -- as well as several smaller disruptions in between.
Of course, no one can predict with certainty what's going to happen on Wall Street, or what's going to happen in the world that could affect the markets on a given day. But with the combination of my and my team's real-world expertise navigating these types of issues along with our research and complex computer simulations, Keen Wealth can stress test financial plans over a period of years to determine how to position and reposition your assets for a wide variety of scenarios. And by sticking to tried-and-true principles of diversification and strategic rebalancing, we can help folks maintain the financial flexibility they'll need to keep living their best lives at every stage of a market cycle.
2. Inflation will erode some of your purchasing power.
Even as our current bout of above-average inflation continues to ease, higher prices are hitting everyone hard -- especially retirees who are living on a fixed income. In a sense, retirees have been living through an accelerated experience of how inflation will affect their purchasing power over the course of retirement. Under more typical economic circumstances, inflation averages about 2%- 3% a year. Compound that for 25 years and a dollar you had in the bank on the day you retired will lose about half of its purchasing power.
We've discussed many times that "inflation hedges" like gold, cryptocurrency, and shady private equity investments usually don't live up to the hype. Again, keeping your assets diversified and rebalancing when appropriate will give you options for adjusting to inflation during retirement. Some retirees decide to drive up their purchasing power by working part-time in retirement or starting their own companies. And when the time is right, you'll also have Social Security benefits to help you cover your cost of living and other expenses.
3. You're not guaranteed a healthy retirement.
Life happens in retirement, hopefully for better, sometimes for worse.
You or your spouse might have to face a serious medical condition or even a terminal diagnosis. You could have an accident that affects your ability to live independently. In the late stages of retirement, you might be faced with mental declines, motor function conditions, or just the inevitable slowdown that comes with old age.
The good news is that medical science continues to get better at identifying illnesses early and helping doctors design more effective treatment plans. We encourage seniors to maintain a regular schedule with their primary care physicians. Once you transition to Medicare, make sure you take advantage of all its benefits, including your free Welcome to Medicare visit. Talk to your doctor about how you can eat better and exercise appropriately. And if your current health or family history raises some red flags, consider "front-loading" some of your retirement spending so that you can enjoy more of your money while you're able.
4. You might live to 100.
Analysts have been predicting for years that health care advances and better wellness practices are going to drive up longevity. According to Pew Research, the U.S. centenarian population is going to quadruple over the next 30 years.
Seniors who are in good health and maintain good habits need to be ready for the financial ramifications of living to 80, 90, and beyond. Generally, your spending in retirement rises as you age to cover the rising costs of your health care. Health savings buckets, long-term care insurance, and life insurance are just a few of the tools that Keen Wealth will consider as part of a longevity plan. Seniors who are willing and able might also consider delaying retirement a couple of years or retiring to a lower-paying but more fulfilling job so that they can pad their nest eggs for the long run.
5. You could lose yourself and your social circle.
Who are you planning to spend your time with during retirement? If your loved ones aren't on the same retirement schedule as you are, you might not have someone to meet for a cup of coffee or play an extra round of golf with.
And when you leave work, you're not just going to leave behind the people you spend 40+ hours with every week. You're going to be leaving behind the professional responsibilities that gave your days purpose and structure. Many seniors experience a profound loss of identity as they make this transition. This is a major reason that since our founding, we have always made client events a big part of our client experience at Keen Wealth. We call it the “Keen Wealth Community” as our educational, philanthropic, and social events bring our friends and clients together to see old colleagues and make new friends as well.
When I call Keen Wealth's process "comprehensive" financial planning, I'm talking about much more than just your money. Our process starts with getting to know you and your financial goals for every stage of your life through retirement. We pride ourselves on having in-depth personal conversations that help folks crystalize their retirement visions so that they’re excited for every day and always looking forward to something they love. And when you work with Keen Wealth, you’ll feel more confident about the experiences you’re enjoying now and your ability to face challenges in the future.
About Bill
Bill Keen is a financial advisor with over 30 years of industry experience. As the founder and CEO of Keen Wealth Advisors, a registered investment advisory firm, he focuses on providing personalized retirement planning designed to help people thrive before and during their retirement years. With a passion for educating others, Bill regularly blogs about retirement planning, hosts the podcast Keen on Retirement, and has contributed to Forbes, U.S. News and World Report, Reuters, Wall Street Journal’s Market Watch, Yahoo Finance, and other publications. Based in Overland Park, Kansas, Bill and his team work with clients throughout the greater Kansas City area and across the nation. To learn more, connect with him on LinkedIn or visit www.keenwealthadvisors.com.
KWMG, LLC’s dba Keen Wealth Advisors (“company”) is an SEC Registered Investment Advisor located in Overland Park, KS. The company and its representatives may only conduct business in those states where registered or where excluded/exempt or from licensure. For registration information please contact the SEC or the state securities regulators for the states where the company is notice filed. A copy of the company ADV is available upon request. Advisory services are only offered to clients or prospective clients where the company and its representatives are properly licensed or exempt from licensure. No advice may be rendered by the company unless a client service agreement is in place. This information is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy and is for illustrative purposes only. Clients and prospective clients must consider all relevant risk factors involved with each strategy, including costs or fees, and their own personal financial situations before trading.
The views outlined in the book, Keen on Retirement Engineering the Second Half of Your Life, are those of the author and should not be construed as individualized or personalized investment advice. Any economic and/or performance information cited is historical and not indicative of future results. Economic forecasts set forth may not develop as predicted.
The Amazon Best Seller ranking listed on marketing materials is specifically referring to Best Seller rankings for the Kindle Top 100 Paid Lists under the subcategories of: Budgeting and Financial Risk Management, based on data as of September 5, 2019 and the second edition under Financial Risk Management on October 26, 2022. Amazon rankings although relevant on how a product is selling overall doesn’t necessarily indicate how well an item is selling among other similar items or similar item categories. Amazon may choose the most popular categories or subcategories within which an item has a high ranking to determine its best seller rankings. These rankings are updated hourly and as a result, should be expected to fluctuate as such. Keen Wealth Advisors and Amazon are not affiliated entities.
The Steve Sanduski Advisor Network, Belay Advisor, LLC and other third-party contributors to our blogs and podcasts are not affiliated with Keen Wealth Advisors.
For additional details on Keen Wealth Advisors, please visit https://www.keenwealthadvisors.com/important-disclosures.
20240821-3805483-12080294