Retirement planning is more complex than simply saving enough to stop working. There are several potential “killers” that can quietly undermine your progress if you’re not prepared. As a financial advisor, I’ve seen these common threats erode retirement plans, and they can have a lasting impact if not addressed early. Let’s break down four potential retirement killers and explore how to work to mitigate their effects.
1. Taxes: A Potential Drain on Retirement Income
Some people underestimate the impact taxes will have on their retirement income. Withdrawals from traditional 401(k)s, IRAs, pensions, and even part of your Social Security benefits may be subject to federal and state taxes. If you don’t account for taxes, your retirement income may be far less than you expect.
What You Can Do: Develop a tax-efficient withdrawal strategy. Consider diversifying your retirement accounts into a mix of taxable, tax-deferred, and income tax-free accounts (like Roth IRAs) can help give you more flexibility when it’s time to withdraw. Consider doing Roth IRA conversions in lower-income years or when tax rates are favorable.
2. Risk: The Impact of Market Volatility
Market volatility doesn’t stop when you retire, and if you’re heavily invested in the stock market, a downturn at the wrong time can reduce your portfolio’s value. Retirees are particularly vulnerable to sequence-of-returns risk, where a bad market in the early years of retirement can deplete savings more quickly.
What You Can Do: As you approach retirement, reassess your risk tolerance. Consider diversify your investments across asset classes, and consider more conservative vehicles like bonds, annuities, or even dividend-paying stocks that have the potential to provide a more predictable income stream. Keeping an emergency fund outside the market can help protect your portfolio during downturns.
3. Saving Money: The Pitfall of Delaying Contributions
Saving for retirement often takes a backseat to more immediate financial concerns. Many people believe they’ll “catch up” on retirement savings later in life, but this delay can result in missed opportunities for compound growth. Time is one of the most powerful tools in building wealth, and the longer you wait, the harder it may become to accumulate a sufficient nest egg.
What You Can Do: Start saving as early as possible, even if it’s a small amount. Consider maximizing contributions to tax-advantaged retirement accounts like 401(k)s or IRAs, especially if your employer offers matching contributions. Automate savings to help ensure you’re consistently building your retirement fund without having to think about it.
4. Lack of Urgency: A Potential Retirement Plan Killer
Procrastination is one of the most significant killers of retirement. Many people recognize the importance of saving and investing for the future, but the lack of urgency to act can delay essential decisions. Whether it’s failing to start a plan, putting off increasing contributions, or delaying meeting with a financial advisor, every year of inaction can cost you.
What You Can Do: Take action now. Set clear goals and timelines for your retirement. If you haven’t already, meet with a financial advisor to help map out a customized plan that is designed to work for your unique situation. The earlier you start planning, the more options you’ll have and the greater the potential for your wealth to grow over time.
Conclusion
Taxes, market risk, inadequate savings, and a lack of urgency are potential retirement killers that may quietly eat away at your future financial security. The good news is that with the right strategies and early planning, you can work to mitigate these risks and help set yourself up for a more comfortable and secure retirement.
Taking action today can make all the difference tomorrow. By addressing these silent killers head-on, you can ensure that your retirement years are free from financial worry, allowing you to enjoy the fruits of your labor with confidence.
– Jim DesRocher
This material is intended for general public use. By providing this content, Park Avenue Securities LLC and your financial representative are not undertaking to provide investment advice or make a recommendation for a specific individual or situation, or to otherwise act in a fiduciary capacity. All investments contain risk and may lose value. No investment strategy can ensure peace of mind, assure profit, or guarantee against loss. Guardian, its subsidiaries, agents, and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation. James is a Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS). OSJ: 800 WESTCHESTER AVENUE, 4TH FLOOR SUITE N409, RYE BROOK NY, 10573, 914-288-8800. Securities products and advisory services offered through PAS, member FINRA, SIPC. Financial Representative of The Guardian Life Insurance Company of America® (Guardian), New York, NY. PAS is a wholly owned subsidiary of Guardian. Trueview Financial LLC is not an affiliate or subsidiary of PAS or Guardian. 7708194.1 Exp 3/27