Even the best-laid retirement plans can come undone

Most of us will have a retirement plan; a view of how our post working years will play out. It could be as simple as a ‘she’ll be right mate’ through to the more obsessive-compulsive style where every minute detail is carefully thought through and laid out on reams of spread sheets.

However, irrespective of your style of planning, sometimes even the best-laid plans can come undone; usually from something unexpected. And whilst you may have a contingency plan or and emergency fund, have you actually considered what the real impact might mean to your wellbeing? It’s a lot harder to recover from a major financial setback or health shock than it was when you were younger. There’s not normally time or ability to start anew.

So what are the things, the scenarios, that you should consider; however painful they might be to think of, to ensure that your retirement plan is as robust as possible?

Unplanned Unemployment

Many people work well past the minimum retirement age. Some work out of necessity, as their retirement savings are as yet insufficient, whilst others continue to work as a way of keeping busy. Yet an unexpected redundancy or period of unemployment can present a major blow to not only retirement savings, but also to the physical and mental wellbeing of the person affected.

If you expect to work longer and then find yourself suddenly out of work, possibly for an extended period, what implications would this have for you? Would this mean significant adjustments to your retirement plans? Have you considered a more modest Plan B; alternative living arrangements, employment options and lower spending habits?

Fact is, many people who retire early, do so unwillingly or for reasons beyond their control and having at least considered what your options are will help to lessen the burden.

Health insurance

Unfortunately, in many cases of early, unplanned retirement, health issues play a major factor. So the simultaneous loss of one’s job and increased medical costs, can present an expensive double whammy. However, many people underestimate the increased cost of medical insurance post retirement. Many policies are subsidised by corporate employee plans whilst the coverage of others fluctuate wildly depending on a number of external factors.

Have you considered whether your policy is right for you? Have you considered whether your policies might cost significantly more once you stop work? And have you really considered what coverage you need? Does your policy cover long term care or did you cut it to save in the short term?

Medical Costs

Related to health insurance but different on a whole other level is on going and likely increasing medical expenses. With life expectancy on the up, and the cost of medicinal help going up with it, how is one ever to know how much to budget for.

What happens if you or your partner ends up in long term care? What if your plan accommodates you till your 80, but you live for another 20 years? In one respect it’s a nice problem to have (particularly as you might get to become a great-great grandma/pa!), but not so nice if your financial plan didn’t extend that far.

It’s a good time to spend that little extra time really reading the fine print and gaining a good understating of what you are and are not entitled too. A little time spent researching government websites like Medicare could also be well worth the time. There are many things we are entitled to that most of us don’t fully utilise let alone know about! 

Tax Planning

Has your financial adviser provided a tax overview that contemplates numerous possible scenarios: from the possibility that one spouse may retire but the other may not, to the unthinkable loss of a spouse (either working or not)?

Different scenarios may see one fluctuate in and out of higher tax brackets or restrict the ability to claim full or part pension?

Has your retirement plan considered other less obvious taxes like property taxes or body corporate fees, which never go down and only ever seem to go up? You may have your mortgage paid off but if you or your spouse unexpectedly loses the ability to earn, can you afford to maintain these charges?

Again, a robust retirement plan will have at least considered and planned for these events.

Dependents

Whilst we all love and adore our children and grandchildren, have you actually stopped to consider what housing your kids or caring for your grandkids is costing you? Is it eating away your nest egg from the inside?

You might think it’s ok for your twenty or thirty-something to live with you just that little while longer until they ‘find their feet’ but it could make all the difference if you’re exposed to an unexpected setback to your plans.

A lot of time, retirement funds can be run down by stealth with unexpected or unplanned expenditure or significant events that prevent your savings strategy playing out as planned. And many of the above issues can happen all at once. It’s scary to consider, but a major health issue can have very serious flow-on effects to other aspects of your plan. A well-considered and detailed plan can help in times of crisis.

And please, if one of more of these things happen to you, get some sound financial planning advice early, before too many decisions are made without full consideration for your needs now and into the future.

What would these shocks or setbacks do to your retirement plans?