7 Retirement Savings Busters

MSN Money lists seven retirement savings busters as follows:

• Extended long-term care could be needed.
• Your parents may require assistance.
• Children may still need help.
• You may have unexpected travel plans.
• Inflation will sap your purchasing power for decades after retirement.
• Moving costs could be a big expense in retirement.
• There could be changes in the tax code or entitlement programs.

Here's what I hate about these two things: they are often unexpected (and generally can't be planned for) and could be HUGE budget hits.

Of course this doesn't hold true for all of them. But most of these have at least some aspect of uncertainty -- and they all could involve significant amounts of $$$$$$$$$$$$.

So, how can we plan for these? A few thoughts:

• You can buy long-term care insurance. I know many people don't want to/don't think it's needed. And others have a different perspective. We are yet to decide what we'll do.
• You can talk to your parents, see where they are financially, and do all you can to help them become financially set. I know, sometimes easier said than done.
• Prepare your children with education and opportunities that get them jobs they like that provide livable wages. This, of course, assumes you know how to do this yourself, which is a stretch for many people.
• I'm not sure about "unexpected travel plans." This is a completely discretionary spending decision, isn't it?
• Inflation is a HUGE retirement issue, as I noted in The (Often Understated) Cost of Inflation During Retirement.
• Moving costs seem discretionary to me as well.
• Changes in the tax code and entitlement programs are almost a given to me. By default I think most people will earn less in retirement, so even if tax rates go up, total tax paid could go down. As for Social Security and Medicare -- plan as if you'll get zero from them and anything you do get will be a big bonus.

Anyone else have any thoughts on these?

Comments

[John S @ Frugal Rules]

I am not certain why they would include unexpected travel plans either. I would suggest that should be discretionary and should not be a budget buster. Beyond that, I would follow many of the same suggestions you offered. I would buy LTC and diversify as much as possible across both investments and tax purposes.

[Jane]

The unexpected travel stumped me, too. Then I tried to think of ways we might travel more than we planned for and what the impetus for that would be. Say for instance your grown children moved across the country. In order to build strong relationships with our grandchildren we would likely want to spend time with them, so I can see where we might have travel expenses we didn't count on ahead.
There are some sobering items on the list that could keep a person up at night, but the best you can do is plan and prepare to your best ability and trust that all will work out. By the time you get to retirement you've likely had a good number of challenges and setbacks to overcome so hopefully you also will bring into your retired years a skillset to deal with what comes your way. Save all you can, prepare all you are able and then do your best to relax...knowing that there will be stuff to deal with but also knowing you've conquered difficulties before.

[DCS]

I suspect you guys might be adding a vacation connotation to the word travel where none was intended. Travel to visit/tend to a sick loved one, or to attend their funeral would granted be technically discretionary, but emotionally not doing so could be difficult. Even a child deciding on a destination wedding (all the rage now) could be a hard one to say no to, even if it is still technically discretionary.

The same goes for moving - how many recent retirees do you know that moved to their dream home on the lake or in the woods? At 55 that might be fun. But what if it's far from major trauma centers, advanced medical care, and/or family/friends that could lend assistance if they are temporarily or permanently limited somehow?

Do you still want to live 30 mins from town if macular degeneration or Parkinson's disease makes it so you cannot drive? Do you want to be 2 hours (or worse, two airline connections) from your elderly parents that increasingly need your assistance, or children that might be able to assist you, should you need it? Many don't take that into consideration. That scenario is exactly what my parents are experiencing, and they no longer have the means to relocate (although there are other contributing factors).

If their post-retirement home at 55 is more than 30 minutes from a major trauma center and they develop a major heart condition or high risk of stroke, *not* moving 15 years later could be the choice between life and death.

[Catherine]

Moving and unexpected aren't always discretionary.

I live in the region hit by Hurricane Sandy. Insurance and FEMA money simply doesn't cover everyone or everything. No region is immune from some type of disaster that may require an individual or entire community to relocate.

Unexpected disability may require moving if your home won't accomodate a wheelchair bound occupant. Not every home can be retrofitted.

Similarly, certain illnesses may require travel for treatment. A colleague of mine in NYC needed to travel to the midwest for treatment of a very rare cancer. It is so rare that there are only three hospitals in the country with any track record of treating it, and none of them are in New York.

[Old Limey]

DCS is absolutely right.
We gave quite a lot of thought to the idea of moving location when we retired but because we already lived in one of the best locations in the whole USA but it didn't take my skills as a former rocket scientist to realize that it would be assinine to move anywhere else.

Here's a summary of things to consider before moving.

1) Growth of future Property taxes.
2) Proximity to fantastic state of the art healthcare services. The best medicare advantage health plans are only available in large populations centers.
3) Close proximity to two international airports.
4) Ultra fast response time for emergency services.
5) Very fast response time for restoration of public utility services.
6) Timely access to Police and Fire prorection.
7) CLIMATE - we already have the best in the USA - no snow, ice, hurricanes, tornadoes, high humidity, Atlantic storms, or bugs to spoil your summer evenings.
8) Our small city of 120,000 already has an Adult Education Center and an Adult Recreation Center with lots of amenities.
9) Close proximity to all the stores and sevices you need.
10) We already were living in a beautiful single story home, close to everything we ever need and great for seniors - why move?

[Retire By 40]

Moving cost and travel plan shouldn't cost that much right? Just sell all the crap when you move so you don't have to pay so much to move them.
DSC also has some good points.

[Pauline]

You may not decide so much on the moving (being close to your parents to care for them, kid becomes disabled and you need to live on the ground floor, etc) but the unexpected travel looks completely discretionary.
Re the kids it may be a tough one but I would take retirement over paying for their college/underemployment buffer. They will always have a place to crash and be fed at home but once they are independent they should support themselves.

[LotharBot]

Moving and vacation spending isn't necessarily done "for fun". It can be because the rest of the family has gone elsewhere and you want to maintain connections. It can be because where you presently live is unsuitable long term (say, you end up in a wheelchair, but your home is prohibitively difficult to remodel -- or you develop a medical condition that needs regular treatment at a hospital too far to travel to regularly.) It can be because of a disaster or series of disasters (FMF often mentions being "underinsured" as a serious risk.)