Surviving Unexpected Expenses During Retirement

Retirement, Income, Tax & Estate Planning.

Surviving Unexpected Expenses During Retirement

September 6, 2016 Uncategorized 0

In the last decade, we’ve suffered through a couple of significant financial events – the Great Recession, the post-Sandy fallout… we could maybe even put the 2015 mini-recession in there.  But in addition to storms of the century and global financial meltdowns, retirees can face a number of unexpected expenses that can seriously impact, and sometimes destroy, their retirement plans.

The Society of Actuaries – actuaries being the thinkers used by life insurance companies to predict risks and anticipate life spans – put together a study last year.  They surveyed folks that had been retired for at least 15 years and listed out all the significant unexpected expenses that these retirees had experienced.  They were:

Loss of capacity requiring someone outside the household to manage your money
Retirees: 1 percent
Retired widows: 1 percent

Divorce during retirement
Retirees: 3 percent
Retired widows: 1 percent

Significant damage to or loss of home due to fire or natural disaster
Retirees: 3 percent
Retired widows: 4 percent

Loss of home through foreclosure
Retirees: 3 percent
Retired widows: 6 percent

Bankruptcy
Retirees: 4 percent
Retired widows: 4 percent

Victimization by fraud or scam
Retirees: 6 percent
Retired widows: 5 percent

Loss in total value of savings of 10 percent or more due to poor investment decisions
Retirees: 9 percent
Retired widows: 8 percent

Death of a spouse or long-term partner
Retirees: 10 percent
Retired widows: 56 percent

Family emergency that impacted the amount able to spend on other things or used 10 percent or more of savings
Retirees: 12 percent
Retired widows: 18 percent

Going on Medicaid
Retirees: 14 percent
Retired widows: 11 percent

Sudden loss of total value of savings of 25 percent or more due to a fall in the market
Retirees: 14 percent
Retired widows: 13 percent

Running out of assets
Retirees: 15 percent
Retired widows: 16 percent

Illness or disability that limited the retiree’s ability to care for himself or herself
Retirees: 15 percent
Retired widows: 22 percent

Drop in home value of 25 percent or more
Retirees: 16 percent
Retired widows: 22 percent

Significant out-of-pocket medical or prescription expenses from a chronic health condition or disability that did not limit the retiree’s ability to care for himself or herself
Retirees: 20 percent
Retired widows: 12 percent

Major dental expenses
Retirees: 24 percent
Retired widows: 28 percent

Major home repairs or upgrades
Retirees: 28 percent
Retired widows: 34 percent

Now, to put it in context, almost 30% of those surveyed experienced none of these, but 13% suffered at least three and nearly 20% suffered four.  Even more troubling, almost a quarter of widows said they had encountered at least four.

There are two takeaways here.  The first is that the language used is subjective, meaning what you consider a normal home repair, another may consider major.  Secondly, most but not all of these can be neutralized through the use of a comprehensive retirement plan.

If you’re working with us, chances are you know the value of this and are well protected.  If you’re not and/or if you’re still worried about what you’ll do if faced with one or more of these events, give us a call at 215-657-9200 and we’ll work together to tailor your plan to your exacting needs.

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