Episode #17: Financial Blind Spots

Today’s Prep:

When you’re driving, you always check your blind spot before changing lanes. If you don’t, you might find yourself in an accident. Eric covers the blind spots in your financial vehicles.

Equipping Points:

1:10 – Uncovering The Dangers Of A Market Downturn.

  • Market volatility can be dangerous. It’s easy to weather the financial storm when you’re young, but as you get closer to retirement, a market correction can really eat into your portfolio.

1:30 – An Illustration. 

  • Eric illustrates the danger of a market downturn using two different individuals with the same amount of money in their retirement accounts. He shows us that market corrections affect portfolios differently depending upon when they occur.

3:17 – You Need A Safer Place To Withdraw Income.

  • Until you retire, you’ll probably focus on growing your assets. However, you need to think about how you withdraw income in retirement and how those withdrawals will affect your portfolio. If you’re not careful, risk and taxes will eat into your portfolio and leave you without much income.

4:20 – Inflation Is Dangerous.  

  • Inflation will eat away at your nest egg and negatively impact your buying power. Things will cost more tomorrow than they do today. At a simple inflation rate of just three percent, your income will need to double in 24 years just to keep up with inflation. This is what’s known as the Rule of 72.

6:20 – Medical Costs Are Rising. 

  • Medical and long-term care costs are actually increasing faster than the rate of inflation. Retirees used to be most afraid of running out of money. Now, they’re highly concerned about the rising cost of healthcare. You need a plan for how you’ll pay for healthcare in retirement.

7:10 – Taxes Are Killer.  

  • We’re currently in a period of historically low tax rates. This means, eventually, they’ll have to go up. We know the government has a thirst for money, and we know Uncle Sam tends to spend more than he takes in. This means taxes will probably go up, and your tax-deferred and taxable retirement accounts are going to cost you as tax rates increase. Now might be the time to start tax planning and working with your advisor to mitigate your tax burden.

Today’s Takeaway:

Watch out for unforeseen risk in your financial plan. Be aware of the effects of rising healthcare costs, tax rates, and inflation on your portfolio. – Retirement Ready

More From Eric:

The host: Eric Peterson - Contact - Call: (515) 226-1500

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