How to Protect Yourself Against Retirement Emergencies

Written by , March 25, 2013

How to Protect Yourself Against Retirement EmergenciesThe retirement years are supposed to be a time of relaxation, where individuals get to enjoy the fruits of their labors and spend more time with friends and family. Of course, we know that things don’t always happen that way. Unexpected financial emergencies can happen at any time, to anyone, and even the most careful of us can’t avoid these emergencies entirely.

Fortunately, we can plan ahead so that the consequences of these retirement emergencies aren’t quite so dire, and don’t cause much damage to our financial health.

Here is some retirement advice for protecting yourself against some of the most common retirement emergencies.

  • Continue Maintaining Your Emergency Fund. While the concept of an “emergency fund” is familiar to many people, some only make it a priority during the earlier stages of their adult lives. For example, parents often think of their emergency fund as a resource that can help them with unexpected expenses that relate directly to their children. Unfortunately, these individuals often stop contributing to their funds once their children have become adults. Some may even spend what they’ve saved in their emergency funds since they believe having this financial cushion is no longer necessary. But emergencies can happen at any time, so it’s important to continue making your emergency fund a priority in your budget, even during retirement.
  • Stay Healthy. The most common trigger for personal bankruptcy in the United States is overwhelming medical expenses. These expenses can come certainly come about as a result of an accident, but an increasing number of cases are due to chronic and preventable medical conditions. Keeping yourself healthy – by eating right and getting enough exercise – can help reduce the chances that you’ll face this type of financial emergency during retirement.
  • Stay Insured. Along the same lines, you should plan ahead for the resources you’ll need to obtain adequate health insurance for yourself and your spouse during your retirement years. Medicare can provide some coverage, but most individuals will prefer the security of having additional policies in place to provide coverage in the amounts and types that Medicare does not.
  • Don’t Overestimate Your Future Investment Returns. Financial emergencies only rise to the level of a true emergency if you don’t have the resources on hand to address them. Unfortunately, many current and future retirees overestimate how much their investment portfolio will earn each year. It’s probably unreasonable to use the 10-15% annual return figures that some financial literature has used in the past. If using a more conservative estimate of future returns doesn’t provide you with a clear path to the nest egg you desire, then you’ll need to contribute more to your accounts or adjust your retirement expectations.
  • The most devastating effects of a financial emergency during retirement are when the emergency is entirely unexpected. By doing what you can to “expect the unexpected,” you’ll be in a better position to make it through any such emergency.

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