How to Manage 3 Common Retirement Emergencies

It’s no secret that successful planning is the key to enjoying a worry-free retirement. It’s also true that you never know what life’s going to throw at you.
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Emergencies seem to happen when least expected and can often bring significant expenses. When you’re retired, the consequences can be devastating. Large, unexpected costs can deplete your savings and wreak havoc on your finances if you aren’t prepared.

How can you plan for the sudden emergency expenses you never see coming? Well, we can’t offer you a crystal ball, but we can help you be as prepared as possible for when unexpected expenses arise.

Below are three common retirement emergencies and suggestions on how to help minimize your risk:

Major Home Repairs
The joys of homeownership are many, but the possibility of major expenses isn’t one of them. When your house requires repairs, or major home appliances need replacement, the cost can be considerable.
The unexpected expense of a new roof or replacing a broken water heater can be especially challenging in retirement. Repair bills can make a significant dent in your savings. You may have to withdraw money from other accounts, like your 401(k), triggering extra taxes and potentially affecting your retirement account distribution strategy.

Thankfully, there are several steps you can take to avoid ending up in this situation. One way to do this is to create a separate emergency savings account. This fund would be specifically designated for emergency expenses. Having a large cash reserve set aside for this purpose can prevent you from needing to access your 401(k) or IRA.

Another option is to consider downsizing to a home that requires less maintenance. Whichever strategy is right for you, you can start preparing now to help prevent home repair expenses from becoming a retirement emergency.

Living Beyond Your Savings
To put it bluntly, you want your savings to last as long as you do. It’s not uncommon for people to outlive their retirement savings and then find it’s a struggle to subsist on the income provided by Social Security alone.
There are several ways you can minimize the risk of this happening to you. One important step you can take is to calculate the amount of money you could withdraw each year assuming you were to live into the maximum range of life expectancy. This may provide a better understanding of how you can prevent depleting your retirement savings too quickly.

Another step you can take is to delay filing for Social Security until the maximum age of 70. Your benefits will increase each year you delay. By waiting to file, you can ensure you’ll receive the largest potential payment possible.
You may also want to consider tools like annuities and other sources of guaranteed* income. Annuities can offer an additional means of providing a guaranteed* flow of income for life.

Excessive Medical Costs
Astronomical medical costs can frequently create financial emergencies in retirement. Fidelity estimates a 65-year-old couple can expect to pay $260,000 for out-of-pocket medical costs in retirement today.1
Choosing the right combination of insurance coverage may provide you with greater protection against high medical costs.

One option you may want to consider is a Medicare Advantage plan that bundles traditional Medicare with supplemental coverage. Many of these types of plans have a cap on out-of-pocket costs, which may significantly help reduce the amount you could be required to pay.

You might also want to consider acquiring long-term care insurance to help with ongoing care and assistance. Medicare typically doesn’t cover long-term care costs, but the need for long-term care is rising.

Determining the plan and level of coverage that’s best for you can help you make sure you’re prepared for any health care–related expenses down the road.

Are you prepared for these and other common retirement financial emergencies? Let’s talk about it. Give us a call at Gallagher Financial Group and discuss it with a retirement planning professional today.

1https://www.fidelity.com/about-fidelity/employer-services/health-care-costs-for-couples-in-retirement-rise
*Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values.

This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.
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