Dealing With Uncertainty While Planning For Retirement

Uncertainty is an inevitable part of life and quite prevalent in retirement planning as well. Since life after retirement is in some ways, dependent on your past investments, the market condition and volatility can largely impact your decisions. There are many things that you cannot predict beforehand and no amount of planning can guarantee a 100% safe and secure future. Nevertheless, preparing well can take the burden off these uncertainties to a great extent. 

Here’s how retirees can counter uncertainty in retirement planning. 

Stop Expecting and Start Planning

When considering retirement goals, most peripherals are based on exacting evaluations such as asset values, returns, market strength, interest, inflation, and so on. Retirement uncertainties often turn expectations into stress catalysts. But there is nothing that you can’t approach without planning. 

Planning instead of expecting is a better way to deal with uncertainties in financial plans. By considering the negative and positive outcomes, you can control your present as well as secure your future. Planning is also more logical than waiting for things to resolve on their own. 

Stay Prepared for Unexpected Financial Emergencies

Various financial events can have a significant impact on your retirement assets. Estimates reveal that one in three retirees often experience a 25% depletion of assets due to various economic crises. 

For example, the uncertainty about home repairs can be a prime factor in the depletion of your assets. Needless to say, renovation, interior decors, flooring, home insurances, taxes, etc. can be expensive. The process may act as a financial calamity for retirees. 

You can strategize on spending only on required repairs that you might be willing to pay for the next 20 or 30 years. It may also be a better idea to finish impending renovations and major repair before you hit retirement. 

Car repairs and financial security towards family members are some other unexpected expenses you can face after retirement. These can be dealt with by utilizing your emergency funds and investing in better income-generating assets. 

Stay Abreast of Inflation

Dealing with inflation can be comparatively stress-free while you are still working, as there are always chances of earning more money, getting a bonus, or a salary hike from your employer. But this might not be the case with investment returns and limited funds during retirement. 

Stats show that inflation rates increase like wildfire. The average US inflation rate was 3.22% from the year 1913 to 2013, denoting how prices literally doubled after every 20 years. 

The facts are more astounding when you think about dealing with inflation during retirement. The impact is magnified if you look at the cost of basic daily essentials such as healthcare premiums and costs. Social security returns are not able to keep up the pace with inflation and often fall short. 

The ideal way to deal with inflation is to plan realistically. You must aim to set aside funds specifically for inflation.  

Plan According to a Longer Retirement

Given the advancement in today’s medical technology, people these days live longer than the previous generations. Planning for an additional 5 or 10 years of retirement can be a fruitful resolution. You must try to account for more years in retirement strategies, such as, investment planning, social security, pensions, funds, equities, etc. You can also dedicate funds towards health care expenses which tend to increase with longer life. Including caregiving costs into your retirement planning can also be considered. 

Stay Financially Indulgent 

For the most part, retirement planning is based on finances. Also, uncertainties strike in the most negative way when they pose a financial threat to your post-retirement life. Staying financially aware can help provide better income and good wealth during your life’s golden years. One should know how much they require for smooth retirement life. You should also have a clear estimate of how long your savings will last and how you can strike a balance between your expenses and income. 

Staying financially indulgent helps in envisioning a relaxed retirement, instead of leading a stressful life. This happens when you know where you stand in terms of investment assets and funds. Having a clear understanding of your financial statistics, acts as a base for your all your retirement planning decisions.

To Sum it Up

Uncertainties are a part of life and the magnitude of their effect can increase or decrease with time. But if you know the basic principles of spending frugally and investing wisely, you can easily reduce the influence of uncertainties in your plans. When you balance your retirement income and expenses, you can also abate various insecurities of life. A good way to start is by practicing your retirement plan before you actually retire. A mock drill can help you analyze how effective your plans are. 

Are uncertainties playing a prominent role in your retirement planning? Get in touch with financial advisors for developing a retirement plan.