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4 Surprising Financial Risks to Your Retirement Planning

Wednesday, 17 June 2015 03:14 PM

The idea behind retirement planning is to minimize risk and prevent surprises. But for all the hazards that retirement planners routinely flag — debt, inflation, fraud, market downturns, economic collapse, illness and premature death — some risks still catch people off guard.

Here are four surprising financial risks in retirement planning.

1. Tax Shock
The IRS can claim a far bigger share of your retirement income than you might imagine. As one example, the more overall retirement income you have, the more of your Social Security check becomes taxable. As Dan Ritter writes for Cheat Sheat, the share of Social Security income the IRS will consider taxable can climb as high as 85 percent.

Draw down too much money, too quickly, from your retirement accounts, and you can wind up being bumped into a higher tax bracket — and even face higher Medicare premiums as a result of your increased income, writes "Retirement 2.0" blogger Mary Beth Franklin of Investment News.

2. Losing a Partner
Divorce, or the death of a life partner/spouse, are two of the most stressful and devastating life events, and can upend careful retirement planning. Ameriprise Financial lists both near the top of its "unexpected events" list, noting, "Handling financial matters during this difficult time can be particularly overwhelming."

3. Money Secrets
A spouse or life partner springing a long-hidden piece of bad financial news can have as severe an effect on finances and retirement prospects as any household calamity. Among "The Six Financial Mistakes Couples Make," as tallied by Smart Money magazine, financial secrets can ruin a marriage and a retirement.

4. Living Long
As absurd as it may sound, a long and healthy life after work carries an unexpected risk of its own: You could outlive your money. Longevity — one of the goals of humankind — is something that retirement planners often talk about as a challenge for people living off a nest egg.

"Most people underestimate the amount of time they're going to live, and they invest as if they're going to die in 10 years," Ken Fisher, chief executive officer of Fisher Investments, told Bankrate. Fisher and other wealth managers urge people to save, invest and spend on an assumption of at least 20 years of retired life — perhaps more, given rises in overall life expectancy.

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The idea behind retirement planning is to minimize risk and prevent surprises. But for all the hazards that retirement planners routinely flag - debt, inflation, fraud, market downturns, economic collapse, illness and premature death - some risks still catch people off guard.
retirement, surprising, risks
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2015-14-17
Wednesday, 17 June 2015 03:14 PM
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