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4 Financial Emergencies That Could Derail Your Retirement

You may be planning to spend your retirement playing golf or traveling the world. But if a financial disaster strikes, you’ll have to find a way to bounce back from it. While you can’t necessarily prevent an emergency from happening, there are ways to prepare yourself for a rainy day. Let’s look at some situations that can derail your retirement plans and the steps you can take to deal with them.

Find out now: How much do I need to save for retirement?

1. Your Kids Move Back Home

Boomerang kids can wreak havoc on your retirement plans. You could run out of savings pretty quickly if you have to help your adult children pay for expenses like utilities or groceries for an extended period of time.

If your kids need financial help, it’s important to set boundaries. Establishing ground rules for how long you can assist your child is a good idea, especially if you have a mortgage or other debt that you need to pay off.

2. You Get Sick out of the Blue

4 Financial Emergencies That Could Derail Your Retirement

As you grow older, you may have to deal with serious health issues and major illnesses. Having Medicare or COBRA continuation coverage can reduce some of your healthcare costs, but insurance won’t pay for everything.

Aside from doing your best to stay healthy, there are a few things you can do to keep medical costs from draining your retirement savings. While you’re still working, for instance, you could contribute to a health savings account (HSA). Once you retire, you can withdraw those savings tax-free.

If you’ve already retired, purchasing a supplemental insurance policy or illness-specific coverage can help offset some of your healthcare costs. You may have to use your retirement savings to cover the premiums, but it might be worth considering.

3. Your Spouse Needs Long-Term Medical Care

According to Genworth Financial, the median monthly cost of a private nursing home stay is $7,698. If your spouse needs to live in a nursing facility, you’ll have to figure out how to pay for it. After all, Medicare usually doesn’t cover long-term nursing home stays.

Getting long-term care insurance is one way to avoid paying for nursing home care completely out of pocket. Your premiums might be expensive, but if you can’t qualify for Medicaid, getting long-term care insurance may be your only option.

4. You Didn’t Save Enough

4 Financial Emergencies That Could Derail Your Retirement

If you didn’t save enough money before you retired, you might have to cut back on spending in order to make ends meet. Or you can look for ways to supplement your retirement income.

Social Security may not provide you with much of a safety net. But the size of your benefit check will increase by 8% for every year that you put off collecting your payments (every year after your full retirement age). If you can hold off on taking Social Security, you’ll end up with more money that you can use in retirement.

Bottom Line

Sometimes emergencies are unavoidable. That’s why it’s important to plan ahead. Knowing how to handle certain crises can go a long way toward minimizing the financial fallout you may experience in retirement.

Photo credit: ©iStock.com/DragonImages, ©iStock.com/monkeybusinessimages, ©iStock.com/Eva Katalin Kondoros

Rebecca Lake Rebecca Lake is a retirement, investing and estate planning expert who has been writing about personal finance for a decade. Her expertise in the finance niche also extends to home buying, credit cards, banking and small business. She's worked directly with several major financial and insurance brands, including Citibank, Discover and AIG and her writing has appeared online at U.S. News and World Report, CreditCards.com and Investopedia. Rebecca is a graduate of the University of South Carolina and she also attended Charleston Southern University as a graduate student. Originally from central Virginia, she now lives on the North Carolina coast along with her two children.
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