How to Help Prepare for an Unpredictable Retirement

As we celebrate National Financial Awareness Day, we must recognize that retirement planning is not a one-size-fits-all process. While retirement is an exciting phase of life, it can also be unpredictable, especially in today’s ever-changing economic landscape. 

In this blog, we will delve into essential tips to help you secure a financially stable future. So, let’s get started and discover what you need to know to achieve a more prosperous retirement!

The Importance of Financial Awareness

Financial awareness holds a paramount importance for retirees facing an unpredictable retirement landscape. Having a solid grasp of one’s financials and investments becomes critical. A recent study by the Federal Reserve highlights the challenges faced by individuals with low levels of financial literacy when it comes to saving for retirement. The study reveals that low financial knowledge leads to more financial decision-making challenges and investment management.

However, there is a silver lining: retirees with additional private income, such as investments, reported higher levels of financial well-being than those relying solely on Social Security. This emphasizes the crucial role of financial awareness in helping to shape a more secure retirement.

Being financially aware helps to empower retirees in making informed decisions, identify potential pitfalls, and seek opportunities aligning with their goals. Through education and awareness, retirees can proactively adjust their financial strategies, helping to ensure a more secure and stable retirement despite uncertainty. Let’s take a deeper look at some tips to help you get started.

1. Engage in Comprehensive Financial Planning

A great starting point for retirement planning is seeking advice from seasoned Fiduciary advisors. Surprisingly, a retirement study by Retireable found that more than two-thirds (67%) of respondents have not met with an advisor to create a financial plan. Working with a fiduciary advisor will only help set you up for success in your golden years.

Your chosen Fiduciary advisor should help you create a comprehensive financial plan considering your financial situation, investment goals, risk tolerance, and long-term objectives. However, it doesn’t end there. Regularly reviewing and adjusting your financial plan is crucial to preparing for an unpredictable retirement. Life events, economic changes, and personal circumstances may require modifications to your strategy. 

Stay in touch with your Fiduciary advisor and inform them of any significant changes that could impact your retirement plans. By staying proactive, you can help enhance your financial security and be better prepared for the future.

2. Diversify Your Investment Portfolio

Preserving your retirement funds becomes more attainable with a diversified investment portfolio. Diversification aims to help reduce asset-specific risk – that is, the risk of owning too much of one stock (or stocks) in general, relative to other investments. 

A great example of diversification was when we entered a bear market in 2022. What helped investors weather the storm was by following conventional wisdom and not putting all their eggs into one basket. By diversifying and spreading your investments across different assets, you can help reduce the impact of potential losses and increase the chances of overall financial stability.

However, it doesn’t eliminate market risk, which is the risk of owning that type of asset at all. Investments promising quick and substantial returns often come with higher uncertainty. Striking a balance between conservative and growth-oriented investments can help safeguard your wealth, especially during economic turbulence. Diversification remains a vital pillar of a robust retirement plan.

3. Create a Contingency Fund

An essential aspect of retirement planning is having a contingency (or emergency) fund set aside. More than half of Americans don’t have an emergency fund. A contingency budget is a great tool that helps you plan for the unexpected. Some of the common reasons why someone might dip into their savings include:

  • Health emergencies
  • Insurance
  • Auto maintenance and repairs
  • Financial emergencies

Life is full of uncertainties, and retirement is no exception. A contingency fund helps to ensure you can navigate these challenges without derailing your long-term financial goals. Instead of relying on credit cards or taking early withdrawals from retirement accounts, which may incur penalties and taxes, a well-funded emergency fund provides peace of mind and helps improve financial stability.

Remember, creating and maintaining a contingency fund is a disciplined approach in safeguarding your retirement. You need to find a savings strategy that works for you while not impeding your current lifestyle. In doing so, it can allow you to focus on your long-term investment strategies and retirement plans without worrying about potential financial setbacks. By setting aside funds for emergencies, you can confidently pursue your retirement dreams, knowing you are prepared for whatever life throws your way.

4. Have a Long-Term Care Plan

As we age, the need for medical assistance and support may increase. Long-term care insurance is a valuable tool to help safeguard your assets from being eroded by substantial medical bills. This type of insurance can cover a range of benefits, such as nursing home care, assisted living facilities, and other expenses not covered by traditional health insurance or Medicare. Through long-term care insurance, you can help to ensure you are protected during challenging times– reducing the financial burden of extended medical care. 

If you are unsure of what types of insurance you need as you transition into your golden years, consulting with a Fiduciary advisor experienced in insurance planning can be extremely beneficial in helping to ensure all your insurance needs are met. Insurance transfers the financial risk of life’s events to an insurance company. A sound insurance strategy can help protect your family from the financial consequences of those events. A strategy can include personal insurance, liability insurance, and life insurance.

5. Stay Informed and Educated

National Financial Awareness Day serves as a reminder to remain proactive about financial literacy. Working with a Fiduciary advisor is the best way to stay informed and educated. At Johnson Wealth and Income Management, our CEO and President, Matthew P. Johnson, is committed to educating clients. 

Matthew has been advising in the financial services industry since 1999. He educates clients about income-focused investing and helps them achieve a well-planned retirement. Our firm offers various services to help clients stay educated and informed:

Work With Johnson Wealth and Income Management

Managing retirement finances can be daunting, but it doesn’t have to be. Johnson Wealth and Income Management offers a wealth of services custom-designed to help you get the most from your retirement. Serving clients in Northern Iowa and Southern Minnesota, our trusted team can thoroughly assess your financial situation, identify potential risks, and help you create a personalized plan tailored to your needs.

Ready to get started? Contact us today to schedule your complimentary retirement consultation.

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