Things That Deplete
Retirement Savings
Most people look forward to retirement in their
later years. It is wise not to leave your retirement quality of life
to chance. Even a basic plan will go a long way in ensuring that you
do not outlive your financial resources. Here are the most common
killers of financial resources for retirees.
Retirement Resource Erosion
Several factors can erode retirement financial
resources, potentially compromising the stability and security of
one's retirement income. Accumulated funds can be depleted rapidly
by the factors below.
Debt: Servicing debt rapidly depletes
available funds. (credit cards, personal / revolving loans,
automobile loans, mortgages etc.)
Inflation: Over time, the rising cost of
goods and services can diminish the purchasing power of fixed
retirement incomes, making it more challenging to cover everyday
expenses.
Too much Liquid Cash: Liquid cash is not
able to keep up with inflation, so its purchasing value goes down
over time.
Healthcare Costs: As retirees age,
medical expenses tend to increase. Unexpected health issues or
long-term care needs can lead to significant financial strain if not
adequately planned for. Prolonged or unexpected health issues can be
costly, having insurance is highly recommended, but can be costly
itself.
Market Volatility: Investments in
stocks, bonds, and other financial instruments are subject to market
fluctuations. Economic downturns can negatively impact retirement
savings, particularly if withdrawals are required during periods of
decline.
Unprotected Loses: Experiencing a loss
which is under covered by insurance. Property and Casualty insurance
is discussed in more detail in another article.
Longevity: Outliving one's savings is a
significant concern for many retirees. Longer life expectancies
increase the need for a sustainable income stream that can support
living expenses for an extended period. The longer you live, the
more money that is needed. This makes the instruments that provide
lifetime income attractive.
Taxes: Withdrawals from tax-deferred
accounts such as 401(k)s and IRAs are subject to income tax. Changes
in tax laws or unexpected tax liabilities can reduce the net income
available to retirees.
Unexpected Expenses: Unplanned expenses,
such as home repairs, family emergencies, or legal fees, can quickly
deplete retirement savings if not anticipated and budgeted for.
Scams and Identity Theft: Many seniors
are targeted by people relying on the sympathy or naivety of seniors
in order to extort money from them with false causes or promises of
money in exchange for a fee. The scams are continually becoming more
sophisticated.
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Page Last Updated: 20 March 2025