Everyone loves a good Halloween horror story. But when it comes to your retirement, thrills and chills are much less entertaining. Consider these terrorizing tales and take the steps now to keep them in the land of fiction.

1. Outliving Your Money

The prospect of a long life probably doesn’t sound too ghoulish, but with a long life comes a long retirement. According to the Social Security Administration, if you and your spouse live to be 65, there is a 1 in 4 chance that one member of a couple will live to be 95.

Running out of money is a scarier prospect than dying for a majority of Baby Boomers, according to a study by Allianz Life. Research shows that 8 percent of people in the top income quartile run out of money if they are only retired for 20 years.

There are a couple of explanations for this. First of all, people spend more in their first few years of retirement than they do when they are working, and they fail to budget accordingly. But some simply aren’t prepared for “the worst” when it comes to the duration of their retirement.

2. Getting Stuck with Bigger RMDs Than You Need

Nothing will suck the blood out of your retirement savings like getting hit with a high tax bill. The “D” doesn’t stand for Dracula, but Required Minimum Distributions (RMDs) are scary in their own right because they have the potential to put you in a higher tax bracket.

Many people take full advantage of their employer contributions to a 401(k) or 403(b), and that is generally the right move. But being over-invested in tax-deferred accounts means you might be taking on more money (and tax liability) than you want starting at age 70½.

3. Timing Social Security Wrong

Next to the possibility of running out of money, Social Security is one of the greatest fear inducers for people approaching retirement. Take it too early, and you might not have enough income to meet your retirement goals. Start too late, and you might miss out on years of payments.

Take an honest assessment of your health. If you are in good shape, it might make sense to delay getting benefits. Consider your financial resources, and whether you need income sooner than later. Consider your spouse’s retirement age and health, and work with your financial adviser to make Social Security a less frightening proposition.

4. Being Unprepared for Medical Expenses

The sheer unpredictability of health care in retirement can seem spookier than the health problems themselves. A healthy couple retiring today can expect to spend $363,946 on health care alone, so even small deviations from the average can slash your retirement nest egg.

Plan ahead. Consider a Health Savings Account, which can be used as an investing tool if you remain in good health. Long-term care insurance is increasingly available through employers and life insurance policies. Do everything you can to take the guesswork out of one of your biggest expenses in retirement.

5. Inflation Devouring Your Investments

Nobody asks for a zombie apocalypse. But if you are over-invested in retirement vehicles with a low rate of return, you can expect inflation to nibble at your retirement savings.

As you get closer to retirement, it often makes sense to move your money into safer investments. Defensive investing is an important strategy, but if you play it too safe, you’ll find that your investments are losing money for you when you need to be generating wealth.


The opinions voiced in this article are for general information only and are not intended to provide specific advice or recommendations for any individual.

This article originally appeared in the Pioneer Press. You may view the article here.

Peg Webb

Peg Webb

Senior Vice President, Financial Advisor & Host of the “Your Money” radio show

Series 7, 53 & 63 Securities Registrations,1 Series 65 Advisory Registration,† Insurance License Peg was attracted to the financial services industry early in her career. She feels fortunate to be able to use her 30 years of in-depth knowledge working alongside Preston, the Roundtable™ and their staff to prepare clients for retirement. A lifelong learner, she enjoys collaborating with her team to stay on top of the best practices regarding comprehensive planning....Read More