3 overlooked retirement risks to address now

One of the most common reasons people seek expert financial advice is to ensure they’ve saved enough to secure a comfortable retirement.

While the size of your pension pot and other investments you’ve accumulated during your career will be key, there are areas you could easily overlook, causing your carefully crafted retirement plan to falter.

3 overlooked risks that could erode your long-term financial security

1. Misjudging your life expectancy

With more people prioritising their health and wellbeing, and advances in medical science, life expectancies are increasing.

In Ireland, the average 65-year-old man could expect to live to age 83. Meanwhile, a woman of the same age has an average life expectancy of 88.[1]

So, your retirement could last for 30 years or longer. Underestimating how long you may need to fund your retirement could lead you to adopt a conservative investment strategy – for example, you could end up holding too much of your wealth in cash or fixed-income investments.

Failing to take enough risk could prevent you from enjoying continued investment growth. Over the long term, this could hamper your ability to create a sustainable income throughout your retirement.

On the other hand, investing in a well-diversified portfolio, combined with a careful withdrawal strategy, could help ensure you have enough for your whole retirement.

2. Inflationary pressures

As you’ll have noticed in the recent post-Covid years, rising prices can strain your budget.

Having seen the effects of inflation on your monthly costs, imagine how it could affect the real-terms spending power of your cash and investments over the long term.

While you can’t avoid the damaging effects of inflation, a sound investment strategy could help you maintain your purchasing power and, as a result, your standard of living in retirement.

According to the Irish Examiner, people in Ireland have an estimated €1.3 trillion in cash and savings. Plus, data from the Central Bank suggests that only 2.3% of assets are held in investments.[1]

And yet, historically, equities have outpaced inflation over the long term, helping to grow wealth and offset rising costs. Together, the right mix of these assets could support long-term growth and help you stay on track with your retirement goals.

Cashflow modelling can help you visualise how inflation might affect your long-term wealth. The smart software can also illustrate projected investment performance and how spending patterns could alter your long-term financial picture.

Read more: What a cashflow model can (and can’t) tell you about your future 

3. The cost of later-life care

Though you may not like to dwell on the facts, the older you get, the greater the chance you’ll experience declining health. And in some cases, this could lead to you needing care and support.

While it’s impossible to predict what the future holds, you can plan ahead by estimating what healthcare costs you may need to cover later in life.

First, understand what health cover you’re entitled to through your medical card. You may also wish to consider purchasing private health insurance. Research suggests almost half of people in Ireland already have cover.[3]

If you don’t already have health insurance, now may be a good time to address that. 

Beyond this, you should account for the possibility that you’ll need to pay for additional care – either in your own home or in a care home.

According to figures from United Irish Healthcare:

• Home care costs between €20 and €30 per hour, which could add up quickly if you needed round-the-clock help.

• Live-in care could cost up to €1,500 per week.

• Nursing home care ranges from €800 to €2,400 per week.[4]

Remember, under the Fair Deal scheme, the government may cover up to 80% of costs.

While doing your calculations, make sure you factor in additional services such as physiotherapy or dementia care.

I’m here to help you plan for a secure financial future

From understanding your life expectancy to investing for a sustainable income and factoring in potential costs of later-life care, I’m here to help you identify steps you need to take to maintain the retirement lifestyle you dream about.

To find out more, please email rory@brazilfinancial.ie or call + 353 86 824 7542. I’d be delighted to answer your questions.

Please note

This article is for information only. It does not constitute advice.

It describes financial planning services that Brazil Financial Planning can offer to you.

Brazil Financial Planning Ltd T/A Brazil Financial is regulated by the Central Bank of Ireland. Registered No. 477512.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

Sources

[1] Central Statistics Office: Irish Life Tables

[2] The Irish Examiner: Irish wealth hits a record €1.3 trillion but households are afraid to invest it in stocks or shares

[3] MoveHub: Guide to Healthcare in Ireland

[4] United Irish Healthcare: Nursing Home vs. Home Care: A Financial Breakdown for Irish Families