Column, Money Matters

Certain uncertainties in retirement

By Kevin Theissen

The uncertainties we face in retirement can erode our sense of confidence, potentially undermining our outlook during those years.

Year after year, few retirees say they are very confident about having enough assets to live comfortably in retirement. And more are either not too confident or not at all confident.

Today’s retirees face two overarching uncertainties. While each on their own can lead even the best-laid strategies to go awry, it’s important to remember that remaining flexible and responsive to changes in the landscape may help you meet the challenges of uncertainty in the years ahead.

An uncertain tax structure

Covid-19 stimulus funding, mounting national debt and the growing liabilities of Social Security and Medicare are straining federal finances. How these challenges will be resolved remains unknown, but higher taxes—along with means-testing for Social Security and Medicare—are obvious possibilities for policymakers.

Whatever tax rates may be in the future, taxes can be a drag on your savings and may adversely impact your retirement security. Moreover, any reduction of Social Security or Medicare benefits has the potential to place a further strain on your retirement.

Consequently, you’ll need to be ever mindful of a changing tax landscape and strategies to manage the impact.

Market uncertainty

If you know someone who retired, or looked to retire back in in 2008, you know what market uncertainty can do to a retirement blueprint.

The uncertainties haven’t gone away. What will be the lasting impacts of the pandemic? Are we looking at the possibility of negative interest rates? How will political issues impact the economy? Will the U.S. debt be a drag on our economic vitality?

Over a 30-year period, uncertainties may evaporate or resolve themselves, but new ones historically have emerged. This means understanding that the solutions for one set of economic circumstances may not be appropriate for a new set of circumstances.

Scottish philosopher Thomas Carlyle said, “He who could foresee affairs three days in advance would be rich for thousands of years.” Preparing for uncertainties is less about knowing what the future holds as it is about being able to respond to changes as they unfold.

Kevin Theissen is the owner of HWC Financial in Ludlow.

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