Saving up for retirement can be a challenge no matter when you plan to enter this next financial phase of life, but it can be especially challenging in 2024. Whether you are already in retirement or plan to retire soon, it’s important to be aware of the factors that could negatively impact your retirement this year — and, ideally, come up with a plan to mitigate them.
Here’s a look at the two major factors that could negatively impact your retirement in 2024, and how to plan around them.
High Inflation
When you retire, you’re typically living on a fixed income — so inflation can impact you particularly hard.
“High inflation is an ever-present risk for retirees,” said Thomas Brock, CFA, CPA, an expert contributor for Annuity.org. “The threat is most significant for those living entirely on modest fixed incomes, such as the cash flows provided by Social Security, pension plans and annuities. These individuals have minimal capacity to combat the wealth-eroding effect of rising prices, which can negatively impact their standard of living and increase longevity risk, the prospect of outliving your money.”
How To Plan Around It
You can’t control the rate of inflation, so the best thing you can do is to prepare your finances to withstand it.
“The best way to mitigate inflation risk is to maintain a flexible budget that can be adjusted during challenging economic times,” Brock said. “For retirees with an investment portfolio, structuring your asset allocation to combat inflation is also important. This means allocating meaningful money to assets that fare well when prices are on the rise. This includes growth-oriented stocks, real estate and inflation-protected debt instruments.”
Rising Healthcare Costs
You might be in great health now, but it’s vital to be prepared for potential medical costs down the line.
“Healthcare costs are another blow to retirees’ finances,” said Jeff Rose, CFP, founder of Good Financial Cents. “With age, healthcare needs usually go up, and so do the expenses. In 2023, Fidelity Investments found that a 65-year-old couple retiring would need about $315,000 saved just to cover healthcare expenses in retirement. And that’s AFTER taxes!”
How To Plan Around It
Healthcare costs can rise over time, so you need to ensure you can a way to pay for them.
“To tackle these costs, considering supplemental health insurance or a Medicare Advantage plan could be beneficial,” Rose said. “Also, having a specific savings fund for healthcare can provide a safety net for medical bills that Medicare doesn’t fully cover.”