By Ross Marriner
As former U.S. president Benjamin Franklin famously said, “If you fail to plan, you are planning to fail.” This sentiment is especially true when it comes to preparing for retirement. Even a well-structured retirement plan can face challenges due to various risks. Being able to identify these risks allows you to prepare more effectively, enabling you to make informed decisions and better safeguard your future.
Some risks are within your control, while others are not. For instance, one significant risk is not saving enough for retirement. Fortunately, this is something you can manage by taking action early in your life—ensuring you save adequately, seek proper financial advice, and diversify your investments across appropriate asset classes.
Conversely, there are risks beyond your control, such as illness, market downturns, job loss, or changes in government policies. While you can mitigate controllable risks, it is essential to understand the potential impact of uncontrollable risks and have a strategy in place to handle the consequences of these events if they arise.
Deciding when to retire is a personal choice that depends on various factors, including health, finances and psychological readiness. The threat of job loss due to retrenchment is becoming more common, making it crucial to seek sound advice if this situation was to occur. Many people strive to retire as soon as they possibly can, assuming they have saved enough for their retirement years.
Working a few additional years—even part-time—can significantly improve your financial security during retirement. The unfortunate reality is that fewer than 6% of retirees are currently able to maintain the lifestyles they were accustomed to prior to retirement.
Healthcare costs are another major concern for retirees. As we age, medical needs tend to increase, leading to more frequent treatments and higher medical expenses. Medical care and insurance costs can become substantial burdens, placing a significant strain on retirement funds. An unexpected illness may require costly home modifications or caregiving services, further stretching your financial resources. Having the right medical aid and risk insurance cover is crucial to managing these unexpected expenses.
Adopting a healthy lifestyle while you are still young can also help reduce the risk of developing chronic diseases later in life. These diseases can often lead to hefty healthcare costs when you can least afford them. Eating a balanced diet, exercising regularly, refraining from bad habits such as smoking and utilizing preventive healthcare will help to prevent problems later in life.
Understanding the potential risks you may have to face in retirement allows you to develop a more informed and resilient financial plan. It would be sensible to consult with a Certified Financial Planner® who will be able to help you to navigate these challenges and better prepare for a secure retirement.
Rands and Sense is a monthly column, written by Ross Marriner, a CERTIFIED FINANCIAL PLANNER® with PSG Wealth. His Financial Planning Office number is 046 622 2891.
