8 Common Obstacles That Could Derail Your Retirement
William Shakespeare once wrote, “The course of true love never did run smooth.” The same can be said about the road to retirement. It’s filled with potential twists, turns, and roadblocks that can catch you off guard if you’re not prepared.
Understanding the most common retirement obstacles is the first step in planning for a smoother path. In this article, we’ll explore eight challenges that could impact your retirement and how you can overcome them.
1. Lack of Income
One of the biggest retirement concerns is not having enough money to live on. A 2024 AARP survey revealed that 1 in 5 Americans over age 50 have no retirement savings. More than half of respondents said they worried their money wouldn’t last.
The good news? It’s never too late to start saving. Whether you’re contributing to an IRA, Roth IRA, or employer-sponsored 401(k), the key is consistency. Also, remember that Social Security only replaces about 39% of your pre-retirement income, according to the Center on Budget and Policy Priorities. So, having additional savings is essential.
2. Longevity Risk
Living a long, healthy life is a blessing, but it also means your money needs to last longer. This is especially critical for women, who tend to live longer but may have fewer retirement savings.
Are you confident your retirement plan will fund your lifestyle for 20 to 30 years? Does it have flexibility to handle unexpected events, like a major medical issue? Planning for longevity now can prevent financial stress later.
3. Taxes in Retirement
Even in retirement, taxes don’t disappear. However, there are smart strategies that may help reduce your tax burden. For example:
Shifting some assets into Roth accounts
Drawing down taxable accounts before claiming Social Security
Considering income-producing annuities
According to Investopedia, these strategies can help reduce how much of your Social Security income is taxed. Every case is different, so it’s wise to work with a financial professional who understands retirement taxation.
4. Market Downturns
The market goes up—and it comes down. If you retire during or just before a downturn, it could affect how long your money lasts.
Rather than fearing market cycles, prepare for them. A diversified investment strategy that includes safer income sources may help you weather market volatility while keeping your long-term goals intact.
5. Inflation
Inflation quietly eats away at your purchasing power over time. Even modest inflation can reduce how far your retirement dollars go, especially when it comes to everyday expenses like groceries, gas, and medical care.
Make sure part of your portfolio is designed to grow and outpace inflation. That might include equities, inflation-protected securities, or certain annuities.
6. Medicare Gaps
Turning 65 gives you access to Medicare, but it doesn’t cover everything. Original Medicare leaves significant out-of-pocket costs, especially when it comes to prescriptions, vision, dental, and long-term care.
Exploring all your Medicare options, including Advantage Plans and Medigap coverage, can help reduce surprises and protect your retirement income from being drained by medical bills.
7. Long-Term Care Costs
One of the most overlooked expenses in retirement is long-term care. Medicare only covers up to 100 days in a skilled nursing facility under certain conditions (source).
After that, many retirees rely on Medicaid—but that can come with limitations, including fewer facility options. Long-term care insurance offers more flexibility and can provide access to additional services, such as home health care or private rooms in nursing homes.
A Wayne State University guide highlights the key differences between Medicaid and long-term care insurance. If staying in control of your care is important to you, this type of insurance may be worth considering.
8. The Loss of a Spouse
Losing a spouse is emotionally devastating, but it can also create a financial ripple effect. The “widow’s penalty” refers to the income reduction many surviving spouses face, often coupled with increased tax burdens.
A strong retirement strategy should include a plan to protect the surviving spouse’s lifestyle. This might involve income protection, guaranteed sources of income, or life insurance.
Next Steps
These eight obstacles can create major setbacks if not addressed in your retirement plan. The key is to recognize them early and put strategies in place to reduce their impact.
To explore these topics further, download our Eight Obstacles to Retirement brochure.
If you have any questions or want a second opinion on your retirement strategy, visit www.OBWMLLC.com or call our office at (405) 993-6296. We’re here to help you build a secure and confident retirement.
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Disclosure:
All content discussed in this article is for informational and educational purposes only and does not constitute financial, legal, tax, or investment advice. Opinions expressed are solely those of Olive Branch Wealth Management, LLC and its staff. The information presented is believed to be from reliable sources; however, Olive Branch Wealth Management, LLC makes no representations as to its accuracy or completeness. This article shall not be construed as an offer to sell or a solicitation to purchase any insurance product in any jurisdiction in which the agent is not licensed. Topics should be discussed with a licensed insurance agent, tax professional, or financial adviser before implementation. Olive Branch Wealth Management, LLC is not affiliated with or endorsed by the Social Security Administration or any government agency.
Sources:
https://press.aarp.org/2024-4-24-New-AARP-Survey-1-in-5-Americans-Ages-50-Have-No-Retirement-Savings
https://www.cbpp.org/research/social-security/top-ten-facts-about-social-security
https://www.gobankingrates.com/money/financial-planning/financial-issues-only-women-face/
https://www.investopedia.com/ask/answers/013015/how-can-i-avoid-paying-taxes-my-social-security-income.asp
https://www.medicare.gov/publications/10153-medicare-coverage-of-skilled-nursing-facility-care.pdf
https://www.kff.org/medicaid/issue-brief/a-look-at-nursing-facility-characteristics/
https://hr.wayne.edu/tcw/other-benefits/ltc-vs-medicaid.pdf
