Retirement planning is crucial to ensure financial security in your golden years. However, many older Americans often forget to budget for certain risks that can significantly impact their retirement income. One major risk is healthcare expenses not covered by Medicare.
While Medicare provides coverage for many medical needs, it does not cover everything. Dental care, eye exams, prescription glasses, and hearing aids are typically not included. Additionally, Medicare enrollees may face premiums, copays, and coinsurance costs.
Long-term care is another significant expense that Medicare does not cover. This includes nursing home stays and home health aides for daily activities. According to Genworth, the annual costs for long-term care in the U.S. for 2024 are substantial, ranging from $70,800 for assisted living to $127,750 for a private nursing home room.
Inflation is also a hidden cost that can upend your retirement budget.
Forgotten risks in retirement planning
While Social Security benefits are designed to keep up with inflation, ensuring that your savings can do the same is critical.
One way to combat this is by maintaining some growth-oriented investments, such as equities, in your retirement portfolio. To mitigate these risks, there are several steps you can take. Consider purchasing long-term care insurance, although it can be costly.
Delaying your Social Security claim past your full retirement age can also provide a larger monthly benefit, giving you more leeway to tackle unexpected expenses. When constructing your retirement portfolio, be mindful of asset allocation. Investing a significant portion in volatile stocks can be risky, as they may lose value sharply during economic downturns.
Instead, consider allocating more towards low-volatility dividend stocks. During market downturns, resist the urge to withdraw your investments, as this can turn temporary losses into permanent ones. Instead, reassess and rebalance your portfolio as needed.
By being aware of these often-overlooked expenses and taking proactive steps to address them, you can help ensure that your retirement years are financially secure and enjoyable.
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