Top 6 retirement concerns you can't afford to ignore

When it comes to retirement, you need to think about the "what ifs" that could keep you from reaching your goals. Here's some information that could help you better prepare.

An auto accident. A house fire. A natural disaster. Life is unpredictable. That's why you have insurance. It protects you in the face of the unknown and, just as important, can give you peace of mind. Retirement planning is no different - the more prepared you are, the more comfortable your retirement can be. Retirement concerns for most people tend to center on health and money, which are in many ways intertwined. For example, your health plays into how long you can work, how much you'll need to spend on insurance and medical care, where you can live, and your quality of life in retirement. Peace of mind in retirement comes with having planned ahead -putting you in control rather than at the mercy of the unknown.

The first step in making retirement plans is awareness — you have to understand the potential pitfalls before you can address them. That's why we've put together this list of the top six retirement concerns you'll want to consider when mapping your retirement strategy:

1. Outliving your money

The general population is living longer, and many of us haven't banked enough for retirement. Genuine concerns include the possibility of having to work until you die or living on a budget that's just enough to hold you over from one Social Security check to the next.

2. When to draw Social Security

Although you can draw reduced Social Security benefits at 62, the longer you wait (up to age 70), the bigger the payout. The decision about when to begin drawing Social Security benefits likely will be based largely on your health, how long you plan on working, and your assets.

3. Failing to anticipate healthcare costs

Medical expenses are one of the biggest risks to your retirement income. According to the Fidelity Retiree Health Care Cost Estimate, an average retired couple age 65 in 2021 may need approximately $300,000 saved (after tax) to cover health care expenses in retirement. Because Medicare only covers part of those fees, many retirees face a significant coverage gap. And if you're living with or develop a chronic illness, costs rise dramatically.

Protective Life created a video on Rising Healthcare Costs to explain how your medical expenses rise as you age and explores the importance of covering unanticipated out-of-pocket healthcare costs.

4. Earning low interest rates

Paltry rates on certificates of deposits, money market, and savings accounts limit the options for growing retirement funds. What's more, if you've dipped into emergency funds due to setbacks such as a job loss, you may be struggling to catch up.

5. Paying long-term debts

The debts many people now carry later in life are different from those older adults had a few decades ago. According to the Federal Reserve's Survey of Consumer Finances, 37.6% of households headed by people age 65 to 74, and 27.7% of those 75 and older have a mortgage on their primary residence.¹ If paying down debt is preventing you from saving for retirement, you'll need another means for generating income in your later years.

6. Allocating assets

Financial professionals have traditionally advised their clients to temper an aggressive asset management strategy the closer they get to retirement. If you need to catch up or create an additional revenue stream to supplement Social Security, you may need to explore different options for income generation.

One way to hedge against these pitfalls is with a mix of insurance and financial solutions. Annuities, for example, can allow you to accumulate assets, supplement Social Security or a pension, and receive a steady income stream for a set number of years, or even the rest of your life. Cash-value growth in variable and universal life insurance policies could provide an additional resource of funds in retirement. There are many more options are available, and a financial advisor can help you figure out where you stand in relation to where you want to be - and to help you get there when you're ready.

Annuities are intended as vehicles for long-term retirement planning, which is why withdrawals reduce an annuity’s remaining death benefit, contract value, cash surrender value and future earnings. Annuities also may be subject to income tax and, if taken prior to age 59 ½, an additional 10% IRS tax penalty may apply. Because Protective and its representatives do not offer investment, legal or tax advice, it is important that you talk with your own legal, tax and financial professionals about your specific tax situation. Investors should carefully consider the investment objectives, risks, charges and expenses of a variable annuity or variable life insurance policy and the underlying investment options before investing. This and other information is contained in the prospectuses for a variable annuity or variable life policy and its underlying investment options. Prospectuses may be obtained by contacting PLICO at 800.265.1545.

Sources:

1. Nerdwallet, "Should you pay off your mortgage before you retire?" March 11, 2021.

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