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Top 5 Risks to Your Retirement Fund

Saving for retirement can be confusing and arduous. This is especially true if you’re in your twenties or thirties and have decades ahead before you can even seriously consider retiring. However, thinking about and saving for retirement is a major burden that we all have to deal with. To that end, there are constant threats and risks that can severely affect your retirement fund, which means they can have a major impact on your quality of life during retirement. The more you know about these risks and educate yourself on how to minimize them, the better chance you have of securing a sizeable retirement fund that will last you long into your golden years. 

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

Starting Late

Ask any savvy investor what your greatest asset is when it comes to saving for retirement, and they will tell you it’s time. This is true because it allows for compound interest to work in your favor. Compound interest is the interest you earn on your retirement fund, and it adds up significantly over time. Unfortunately, a lot of people fail to recognize its importance, and when they start their first full-time job, they neglect to save early on, forgoing thousands of dollars in lost interest.

Fees

Most retirement accounts and funds will have their share of fees. While inevitable, however, they should not be draining your retirement account, leaving you with minimal savings. The best way to get a hold on fees is to check your statements on a regular basis. Know what it is you are paying for and why. There may be a number of hidden fees you find as you examine your retirement account, so do not be afraid to ask questions about them.

Are Hidden Fees Draining Your 401(k)?

Longevity

We often hear the average American is living longer and longer, and while this is good news, it also has repercussions for your retirement fund. Obviously, the longer you live after retirement, the longer you will need to stretch your savings. There are things you can do to minimize this particular risk, though. Some experts recommend looking at annuities to help provide a stable income throughout your retirement. Also, I would add in taking care of your health, as your retirement years are the time when you’ll likely need the most care. Getting regular checkups, eating a well-balanced diet and getting enough exercise will help to minimize health risks which could eat up a good portion of your retirement fund.

Inflation

Inflation is the increase of prices over a period of time. For those in retirement, rising prices pose a major threat to your savings, as you have to keep withdrawing more and more money just to meet basic needs. Luckily, there are ways to overcome inflation risks, as you can invest in inflation-protected securities, such as stocks aimed at growth rather than income.

Find out now: How should I save for retirement?

Major Life Event

There are a number of life events that can pose a risk to your retirement fund. These include divorce, death of a spouse, major illness, loss of a home and more. These different events can put a strain on your finances and have you withdrawing money from your retirement fund or saving less than expected. Taking money from your retirement fund prior to retirement should be a last resort, though. In order to make sure you do not have to consider pulling money out early, you should have an emergency fund of savings already in place, as well as be regularly checking your savings and investments to ensure you are as informed as much as possible. It’s nearly impossible to predict or avoid major life events, so you can attempt to safeguard your finances by being aware and working with a trusted financial advisor.

5 Retirement Planning Moves for Late Starters

Saving for retirement can seem daunting, especially if it’s far off. What you do years before your retirement, however, can have major consequences for how you live in retirement. Knowing your risks and how to minimize them is one of the best ways to get to retire with the lifestyle you desire.

Photo credit: flickr

Tiffany Patterson Tiffany Patterson has a BA in Political Science from Temple University and an MBA from La Salle University Business School with a concentration in Finance. She is an expert on topics including home buying, life insurance and credit cards. She believes how we treat our finances can have a lasting impact on our lives for years to come. Tiffany loves researching and writing on topics that will help readers lead better lives.
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