The biggest fear for retirees is, and has always been, the same—running out of money before running out of oxygen. The root of that fear is what changes from person to person. No two situations are alike. Everyone has a different set of goals, expectations, family dynamics, obligations, etc. And everyone has a different timeline.
But at its core, that fear of running out of money has always stemmed from these risks:
- Living too long
- Falling chronically ill
- Surviving as a spouse in the event of death or illness
- Cost of living going up
- Losing money that is invested
- Bad timing
- Taxes going up
- Unexpected expenses or obligations
- Severe changes to retirement income
- Making poor decisions
Today is a very different world than it was just two years ago. A retiree in 2022 still faces those same risks and concerns, but there are a few new ones that need to make the list—or at least require more attention.
3. The Great Relocation. Interestingly, less Americans moved in 2021 than ever before (1 in 12). Of course, this is calculated by percentage rate and based solely on what the U.S Census Bureau has on record. Nonetheless, 17% of those who did move, moved to a different state. There is a significant migration taking place. What is the effect on your retirement? Well, that depends. It depends on where you live now, where you will live when you retire, what the population is doing, and how changing politics can have severe impacts on your retirement plan. You may live in a low-cost town in a low-cost state that is experiencing rapid population growth. Which might translate to a not so low-cost retirement. You can’t afford not to consider the impact this could have and plan for it.
2. 7% Inflation. Yes, I know. The cost of living going up was on the original list, but...7%!?! This is an astounding number considering it is the highest climb since 1982. We’ve all heard the saying that time heals all wounds. And most of us are aware that is not really true - it certainly doesn’t heal inflation. Too many people have become numb and spoiled to low inflation, which has been a cause for bad planning. Let this be a reminder to take a new look at all of those “what-if” scenarios your financial advisor has been warning you about for years. (If your advisor hasn’t been doing this, give us a call.)
1. New Money. There is a lot of new money in the markets - and I am not talking about the random farmer that strikes oil. Interest rates have been in the dumps for more than a decade, driving investors to take more risk than they normally would. Government backed anything is pretty much worthless to someone seeking income. Investors have bought the biggest giants on the planet hoping they can find both security and income (think Apple, Amazon, Facebook…), the key word being “hoping.” Risk is a real thing and somewhere in the last decade between The Great Recession and Bitcoin, investors have forgotten that. The biggest challenge a retiree has today is playing t-ball: most retirees just want to get around the bases and not strike out. Your plan better have a plan for when “hope” is no longer enough.
My goal is not to scare the living day lights out of you, but to remind you that this is the reality of the world we are living in today - and there is good news. Now you may realize some things you didn’t know about risks you are facing and can take the next step. It is like Robert Kiyosaki said “The biggest risk a person can take is to do nothing.” So, do something about it and at least get rid of that risk.