5 Factors That May Affect Your Retirement

Halfway There, Participant Resources, Starting Out

It’s important to understand what can affect your retirement plan. Below are five factors that you should be aware of.

Inflation

  • Reduces how much you can buy today, compared to last year

  • Historically, inflation averages 3% annually

  • Your investments need to keep pace with or outpace inflation

Investment Risk

  • Determine how much potential gain you are aiming to achieve with your investments, understanding that also means you may potentially lose a similar amount

  • More risk equals more volatility in returns and account values go up and down more

  • Diversify your portfolio by allocating money to multiple asset classes so you are not totally exposed if one asset type (such as stocks) drops dramatically

Healthcare and long-term care expenses

  • A number of studies show that the average 65-year-old couple can expect to spend hundreds of thousands of dollars on healthcare in retirement

  • The combination of increasing life expectancy and growing medical treatment costs can have a huge negative impact on savings

  • Consider obtaining Long Term Care insurance

  • The premiums can be significant, but having the coverage in place may help avoid disrupting your overall retirement planning strategy

Taxes

  • Employer-sponsored and individual pre-tax accounts offer a variety of ways to receive tax breaks when making your retirement savings contributions

  • Pre-tax contributions provide a current reduction in taxable income, and therefore a reduction in the taxes you pay each year as you are adding to your accounts

  • Roth contributions are done on an after-tax basis, which does not provide a current year tax advantage but does allow you to make withdrawals on a tax-free basis in retirement

You

  • Set goals for what your financial needs will be in retirement

  • Evaluate your personal risk profile and asset allocation strategy

  • Take full advantage of any employer matching contributions you may be eligible for

  • Roll over assets from former employer plans rather than cashing out those accounts

  • Seek out trusted professional guidance or use available self-help tools

To access more information on retirement planning, go to Envoy’s Retirement Planning Education Suite.

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