4 D’s That Can Derail Your Retirement

David Treece, MBA, AIF®, CLTC® |
Categories
Retirement Planning

While retirees have vastly different ideas about how they will spend their retirement years, nearly all share a single goal: to maintain their desired standard of living throughout retirement. Yet, circumstances and events, such as debt, divorce, disability, and death can quickly derail even the best-laid plans. 

While you can’t always control what may lie ahead, you can take steps to better prepare for any challenging circumstances that may come down the track.

Debt

Carrying high balances on credit cards, mortgages, auto and personal loans, or co-signing on loans for family or friends can put your retirement income, and lifestyle, at risk. To help minimize the impact of debt in retirement:

  • Take an aggressive approach to paying down credit card balances before you retire.
  • Downsize if a large mortgage is weighing you down.
  • Build up emergency savings as you pay down debt to avoid repeating the cycle of debt.

Divorce 

Divorce rates continue to climb among older Americans, with 36% of U.S. divorces attributed to those age 50 or older.1 If you’re considering or have already filed for divorce:

  • Locate and make copies of all financial account information and statements for both individually titled and jointly held accounts and assets owned.
  • Understand your rights regarding Social Security benefits and retirement account assets.
  • Include a financial professional on your team, along with your divorce attorney and accountant.

Disability 

An accident, injury, or medical condition can result in forced early retirement, a reduction in income, and unplanned healthcare costs. That makes it important to:

  • Have disability insurance during your working years to help bridge the gap to retirement.
  • Ensure your retirement income strategy accounts for healthcare costs in that may not be covered by Medicare, such as long-term care services.

Death of a Spouse

In addition to the emotional toll, the death of a spouse can have a substantial impact on the surviving spouse’s income in retirement.

  • Consider the impact that your Social Security claiming strategy may have on your spouse before you begin taking retirement benefits.
  • If you’re entitled to a pension benefit, choosing the right distribution option can be critical for protecting your spouse after you’re gone.
  • Ensure all estate planning documents are in place and up to date.

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1 Susan L Brown, PhD and I-Fen Lin, PhD, “The Graying of Divorce: A Half Century of Change.” NIH, 6 APR 2022.