The Biggest Threats to Financial Security – Money Talks News | CarTailz

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Editor’s Note: This story originally appeared on NewRetirement.

Inflation, interest rates, the war in Ukraine, energy prices, deficits, taxes, insurance costs, bear markets, recession, housing crash, housing shortages, income inequality, weak global economy and the list of economic problems goes on and on.

Forget your own competing priorities of children, housing, savings and aging parents.

But what are the real threats to your financial security? And more importantly, what can you actually control or do about the economic issues that worry you most?

Goldman Sachs’ 2022 Retirement Readiness & Insights Report describes the hardships that affect those nearing and already retired the most.

Here are some of the biggest threats to financial security and how you can protect your money.

inflation

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The number of people worried about inflation has risen from 42% in 2021 to 71% today.

Rising costs put a real damper on your financial security. As such, you want to secure as much inflation-linked income as possible for your retirement savings. In fact, aiming to cover 100% of mandatory fixed costs with inflation-linked income is a good goal.

Social security, some pensions, and some annuities are inflation-protected. And if your investments generate a return that exceeds the rate of inflation, your withdrawals could also be considered inflation-protected.

Use the NewRetirement Planner to assess your inflation-protected income streams. The lifetime income projection chart allows you to see your different sources of income. You can also use the detailed budgeter (Expenses > Recurring Expense > Planner+ Budgeter) to define your necessary and flexible spending requirements, and then switch between the two different budgets to evaluate your plan at different spending levels.

The best way most households deal with inflation is to reduce or control their spending. With the job market still strong, working longer hours or getting a retirement job could become a bigger trend.

longevity

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According to the most meaningful metrics, longevity is the goal. However, living longer requires more money and a better plan.

Use the NewRetirement Planner to assess your chances of success and the age at which you will run out of money on various longevity goals. We generally recommend that you allow for at least your expected lifespan plus 10 years of margin for accidental failure.

Try one of the 10 best life expectancy calculators and plan for a long life in financial security.

Lack of money: long-term income risk

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Even if you’re already retired, you can probably get by with record-breaking inflation in the short term, but the real question is: will you run out of money in the future?

The NewRetirement Planner will help you answer this question. You can examine your “chance of success” score or evaluate your “out of money” age. And you can examine these metrics using various worst-case and best-case scenarios.

Develop contingency plans such as B. Spend less, downsize your residence, or get a retirement job for your worst case scenarios.

The financial turmoil and the risks for interest on savings

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The Goldman Sachs report refers to the myriad of financial priorities, life events and planning assumptions that often affect a working person’s ability to contribute to their retirement as the “financial whirlwind.” By midlife, financial pressures mount as people juggle very real spending needs. And the study finds that these competing financial needs are threatening retirement savings.

However, most experts recommend that households prioritize saving for retirement over most other competing priorities. Your child can get student loans and your aging parents can choose Medicaid, but no one else will fund your retirement.

Assess what feels right for you and see what you can actually afford.

lifestyle risk

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It is widely believed that 70% of your pre-retirement income is needed to maintain your standard of living after retirement. However, the Goldman Sachs survey found that only 25% reach retirement and receive at least 70% pre-retirement income, and more than half (51%) receive less than 50% of their pre-retirement income.

Figures suggest that the majority of retirees are living below the lifestyle they enjoyed during their working years.

The lifetime income projection chart in NewRetirement Planner can help you visualize your income and desired expenses over the course of your life. It’s a good idea to display this chart with different best-case and worst-case scenarios. What are your expenses and income:

  • Persistently high inflation rates?
  • Low investment returns?
  • High and low expenses?

Health risks and concerns about the cost of long-term and medical care

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According to Fidelity Retiree Health Care Cost Estimate, the average retired couple aged 65 will need about $315,000 (after taxes) in 2022 to cover their retirement health care costs.

These are out-of-pocket expenses not covered by Medicare and don’t even include the potential costs of long-term care.

Death of a Spouse: It’s not just your financial security at stake

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The Goldman Sachs study suggests that very few people really care about how their spouse will fare after they die. And previous research has found that the majority of married couples plan their own retirement without consulting their partner.

This is a mistake. Households need their income to get by for everyone involved. The NewRetirement Planner is one of the few online tools that fully considers all aspects of a spouse’s current and financial situation.

The viability of social security and other state pension schemes

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Almost half of the people surveyed by Goldman Sachs fear cuts in future Social Security benefits.

While it’s highly unlikely that the government will cut benefits for people who already receive them or who will soon begin receiving them, both Social and Medicare are struggling financially. And in Washington, DC, there is talk of possibly raising the entry age for benefits, cutting benefits for those earning certain amounts, or otherwise addressing the fact that these programs become insolvent.

It can be important for younger workers to take even more responsibility for their future financial security by saving more.

Focus on what you can control

Student Debt Loans Man Distraught Worried
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In any stressful situation, it’s important to focus on what you can control. You can’t change the world economy, but you can control what you spend and, to some extent, earn and save.

Cutting expenses and working longer hours or finding a retirement job are activities many households are now considering. These are relatively simple and highly effective strategies for overcoming economic difficulties.

Optimizing your savings, investments, taxes, and insurance are more sophisticated and viable strategies for improving your financial security.

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