Retirement is a time when many people look forward to leaving the workforce and enjoying what should be the most enjoyable phase of your life.
There are many risks when it comes to investing and preparing for retirement. However, there is one threat that is often ignored which has a HUGE impact on the success and reliability of your retirement. The government can impact your retirement negatively. Here are a few examples:
- Changes to Social Security: Social Security is a government program that provides retirement income for eligible individuals. If the government decides to make changes to the program, such as reducing benefits or raising the eligibility age, it could affect your retirement income.
- Inflation: Inflation is the rate at which the level of prices for goods and services is rising, and subsequently, purchasing power is falling. If the government doesn’t adequately address inflation, the value of your retirement savings could be eroded over time.
- Tax increases: The government can’t exist without the taxes that you pay. When they decide to increase taxes, this will impact your retirement income if you are relying on investments or other taxable sources of income.
- Economic downturns: Economic downturns, such as recessions, can have a significant impact on the value of your retirement savings. If the market takes a downturn and your investments lose value, it could affect your ability to retire on schedule.
- Pandemic Shutdowns: The government is the only one that can shut down entire economies as we saw recently during COVID. Such choices are not only destructive to any economy, but those decisions cause a ripple effect on all the above-mentioned issues that will have a huge impact on the success of your retirement.
There are steps you can take to protect your retirement from these potential impacts. For example,
- Diversifying your investment portfolio can help mitigate the risk of market downturns.
- Making sure you have an income stream that is reliable and guaranteed and as tax efficient as possible.
These 2 simple approaches can help you weather any potential reductions in benefits or increases in taxes. It’s also important to work with a qualified Certified Financial Planner that works exclusively with retirement income distribution so that you make better informed decisions that are specific to your own objectives.
If you have additional questions on making sure your retirement plan is can withstand government and economic risk, make sure to contact us for answers.