Money Pitfalls: Uncovering the Retirement Risks that Could Deplete Your Savings

Many retirees share a common fear: running out of money during their golden years. After working hard for a lifetime, it’s only natural to want a rewarding retirement. However, figuring out exactly how much money is needed to achieve personal retirement goals without sacrificing one’s quality of life can be overwhelming. Knowing what are the biggest risks to your retirement nest egg is important so you can avoid these risks. Here three retirement risks that can deplete your savings.

1. Longevity risk

Longevity risk has become a significant concern in today’s world, with statistics revealing that a couple reaching the age of 65 now faces a staggering 50% chance of living beyond 90.

According to a report published by the National Institute on Aging (NIA) in the United States in 2021, life expectancy in the country has been steadily increasing over the past century. The study showed that between 1900 and 2018, the average life expectancy at birth in the United States nearly doubled, rising from around 47 years to approximately 79 years. This significant increase in longevity is attributed to advancements in healthcare, improvements in living conditions, and better access to medical treatments.

The rise in life expectancy, thanks to improvements in healthcare and living conditions, brings about both advantages and challenges when it comes to retirement planning. While living longer is a good thing, it requires careful thinking about financial resources and strategies to maintain the lifestyle you want throughout your extended retirement. That’s why it’s essential to prepare for retirement properly, making sure your savings and financial plans can support a comfortable standard of living during these extra years.

2. Changes in Social Security

Social Security is an important aspect of retirement planning that requires careful consideration. It serves as a crucial source of income for many individuals during their retirement years. However, it’s important to recognize that Social Security is subject to potential changes in the future. As government policies and economic factors evolve, adjustments to Social Security benefits and eligibility criteria may occur. Therefore, when creating a holistic financial plan, it is essential to account for any potential modifications to Social Security to ensure a well-prepared and adaptable strategy for retirement. It’s possible that Social Security could drop in the future. In fact, the Social Security Administration is even saying that they may have to cut benefits by over 21% by 2034 if changes aren’t made to the system. By proactively considering these potential changes, you can better
safeguard your financial well-being and make informed decisions to support your retirement goals.

3. Inflation
High inflation rates can have a significant effect on your retirement savings. We’ve all felt that over the past few years! As the cost of living increases, you may find yourself needing to spend more each year to maintain the same standard of living. This means that your retirement savings might need to stretch further than anticipated. By acknowledging the potential impact of inflation and factoring it into your financial plan, you can better prepare yourself to adapt and ensure that your savings will be sufficient to sustain your desired quality of life throughout your retirement years.

By understanding these risks and incorporating them into your retirement planning, you can safeguard your financial well-being and increase your chances of enjoying a comfortable and fulfilling retirement.

It’s not just getting to retirement, but you’ve got to make smart financial decisions so you can get through retirement as well.