Factors That Could Impact Your Retirement Fund
Written by Thomas M. Geier, CPA, CFP®, PFS
Most people look towards retirement with excitement and anticipation. It’s a significant lifestyle event that usually portends new found freedom. In retirement, you now have the freedom of time to pursue those activities that you could not while working, such as travel, hobbies, or volunteer projects. You also have the flexibility to make decisions to do things whenever and wherever you want.
Assessing Your Risk
Hopefully having saved up enough money to retire comfortably, you now may want to look at those factors that could impact your funds. Of course, the most obvious risk to your retirement account is changes in market valuations. All investments have risks associated with them. Some have higher risks than others. For example, equity or stock investments are generally considered more risky than investments in bonds. It is important to periodically re-evaluate your risk tolerance to market fluctuations. At Geier Asset Management, we accomplish this through a Risk Tolerance Questionnaire.
Inflation & the Impact on Retirement
Another fairly well known factor is an increasing cost of living during retirement years. Inflation can take an ongoing bite out of your nest egg. It is important to monitor the growth of inflation and take steps to offset its effect. Some common ways to do so are allocating some investments to ones that perform well in inflationary seasons, such as inflation protected bonds, hard assets, and real estate.
Calculating how dependent you will be on Social Security is important, too. Some studies question the viability of future Social Security payments as the baby-boomer generation retires. In addition, congress could make changes to benefit payments, retirement ages, and cost of living increases. Therefore, staying abreast of Social Security rules and any impending changes is prudent.
Medical costs during retirement are very difficult to predict. As people live longer and advances in medicine improve, the portion of retirement funds allocated to medical expenses can fluctuate. For example, high cost items such as skilled nursing care in a private nursing home may be replaced with in-home treatments at a lower cost. Periodic adjustments to medical expense allocations can make a significant impact on how long retirement funds will last.
Be Flexible with Your Retirement Planning
Finally, be prepared for the need for flexibility. Your vision of a comfortable retirement most likely will change as time goes on. You may find different geographic areas appeal more to you than where you live at the moment, requiring selling and buying a residence. The freedom from needing to be near a place of work can allow you to pursue many adventures unknown right now. Funding these opportunities will require some new decisions.
At Geier Asset Management, we enjoy working with our clients to develop a sound retirement plan. We also help monitor any factors that could impact the plan. We strive to provide the best possible objective advice designed to meet our clients’ goals. Contact us today if we can help.
© Geier Asset Management, Inc. August 2017. Thomas M. Geier is a Vice President of Geier Asset Management, Inc., a Registered Investment Advisor. The above blog reflects the opinions of Mr. Geier and not necessarily the firm. Any advice given is general in nature and investors must consider their own individual circumstances. Past performance is no indicator of future performance.