August 20, 2022
You may have envisioned retirement as a second childhood—a time to relax, enjoy yourself, and devote your time to your favorite hobbies. Unfortunately, worry-free retirement is not the reality for some. Challenges from stock market drops, home repair issues, or health complications may send you veering off course. What might seniors do to get back on track after their retirement plans have gone awry? Here are four steps that might help you respond to some retirement setbacks.
When you no longer earn wages or salary income, staying on top of your budget may seem unnecessary. However, when you are on a fixed income, knowing how much you are spending and what you are buying is important. Since inflation increases the prices of everything from gas to groceries to prescription medications, a budget you drafted two or three years ago may no longer suffice.
Once you have a solid idea of your average weekly or monthly spending as compared to your income, you may be in a position to consider long-term financial plans.
If you find yourself frequently scrambling to fund expenses that come up on an irregular or infrequent basis, putting aside money for these expenses may help. For example, many insurance companies require premiums to be paid annually or semi-annually; in states with property taxes, these bills are also often paid on an annual or semi-annual basis. Dividing the total bill by 6 or 12 and then creating a line item for these expenses (and setting aside that amount each month) can ensure that you won’t be caught by surprise. You can also speak with your insurance agent about setting up an automated monthly account for these payments.
In a low-interest-rate environment, it may make sense to take out a loan rather than pay cash for a purchase. For example, why use $20,000 to pay for a new car when the auto loan rate is 3%? Instead, you might invest that $20,000 in something with greater than a 3% rate of return. Of course, the rates you may get might differ from this example.
However, with interest rates rising, taking on debt in retirement may be risky. You do not want to put yourself in a position where you must withdraw funds during a market drop to maintain your lifestyle. You do not want to face rising interest rate payments on a fixed income. It may be prudent during a time of rising interest rates to avoid taking on additional debt and consider retiring the debt you already have.
Most seniors have a variety of sources of aid—from Social Security and Medicare benefits to housing grants, utility efficiency programs, and property tax exemptions. If you need financial strategy planning assistance or want to see what options are available, a financial professional may be able to help. You may also visit the Benefit Finder at www.benefits.gov for more information on senior benefit programs and funds, both federal and state.1
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.
Inflation is the rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling.
All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by WriterAccess.
LPL Tracking # 1-05298171.
1 Benefit Finder, https://www.benefits.gov/
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.
The LPL Financial registered representatives associated with this site may only discuss and/or transact securities business with residents of the following states: AL, AK, AZ, CA, DC, FL, GA, IN, KY, LA, MI, MO, MS, NC, NV, NY, OH, SC, TN, TX, VA, WA, WI.