By Eric Reich
Granted, I’m a little biased when it comes to the importance of flexibility in your retirement plan. After all, it’s 95% of the work I do. That said, the importance of flexibility can’t be overstated. At some point during a meeting with clients, I tell them that the reason for the flexibility is that something will come up during retirement that we didn’t expect. To prove my point, I usually ask them to think back over the last 25 years and see if everything they thought would happen over those years occurred exactly as they planned. Most often, I get a chuckle for obvious reasons. Life never goes exactly as we plan it. If it didn’t happen over the last 25 years, I ask why we think it will over the next 25 years.
Over the next few weeks, I thought we would discuss some of the things that could derail our retirement plans so that we can be mindful of them if they come up. I typically break these risks down into stages. Stage 1 occurs in the early years of retirement or before it even starts. For example, not making it to the retirement age you planned can derail retirement before it even starts. Many people plan on retiring at a specific age which is great, but it is alarmingly common that people don’t reach the age they plan on retiring. While there are dozens of reasons why this happens, the most common reasons include being downsized by your employer, a negative health event, or caring for aging parents. Here’s an overview of each scenario:
1. Getting downsized.
This is a common reason for premature retirement. Companies looking to reduce costs tend to look at the higher-paid employees. That often includes those who have been around a while and are closer to retirement. If this happens to you, it is important to have a secondary plan in place that includes what you will do for the following:
– health insurance
– pension options if applicable
– potential replacement jobs
– reviewing your intended social security claiming plan
– adapting your lifestyle
2. A negative health event prior to retirement.
Next week we will discuss the difference when it happens during retirement. When we plan in our 40s or 50s to retire in our mid-60s, there’s a lot that can change regarding our health over that decade or two. Sometimes it is because we physically can’t do the job any longer. Sometimes it’s because we feel a shift in priorities. Personally, I always planned to work full-time well into my 80s, but a heart attack at age 51 made me reconsider some of my priorities as I age.
3. Caring for aging parents.
Twenty-five years ago, this was almost never a consideration. We simply didn’t live that long. Today, however, we can retire at age 65 and care for our parents for years to come. This can cause many people to leave their jobs sooner than expected. It can also have negative effects on your finances aside from stopping working. Many caregivers have added out-of-pocket expenses associated with caring for loved ones.
Next week we will review more of the things that can derail retirement when you are already retired and what to do about it.
Securities are offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services are offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Reich Asset Management, LLC is not affiliated with Kestra IS or Kestra AS. The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. To view form CRS visit https://bit.ly/KF-Disclosures.
Eric is President and founder of Reich Asset Management, LLC. He relies on his 25 years of experience to help clients have an enjoyable retirement. He is a
Certified Financial Planner™ and Certified Investment Management AnalystSM (CIMA®) and has earned his Chartered Life Underwriter® (CLU®) and Chartered Financial Consultant® (ChFC®) designations. A lifelong resident of Cape May County, Eric resides in Seaville, NJ with his wife Chrissy and their sons ,CJ and Cooper, and daughter Riley.
