First Person: Overcoming Retirement Hurdles

Yahoo Contributor Network

According to a recent MSN Money article, "A recent BlackRock and Boston Research Group poll of 1,002 workers with retirement accounts at work and 1,035 retirees who previously participated in a 401k or similar type of retirement plan found that workers are expecting to pay for and experience retirement in a way that contrasts with the lifestyle of current retirees."

I certainly realize that with nearly three decades to go until I hit retirement age, there is the way that I see retirement in my mind's eye, and my expectations for how that retirement scenario will play out, and then there is reality. And while I would love to live in a reality of my own creation, that's not always a possibility as outside factors often beyond my ability to control can come into play.

With that being said, here are some of the major hurdles I expect to encounter along my road to retirement and how I hope to combat them.

Income Loss

Of course income loss is probably going to be an expectation for just about anyone who works a regular job and is entering retirement. However, this doesn't necessarily mean that it has to be the complete end of any sort of income earned by way of work. Picking up some freelance work, selling things online or through resale efforts, turning a hobby into a source of income, and similar activities are just some of the ways that I expect to be able to continue earning some sort of income in retirement.

Even just being able to maintain 25 percent of my income amount prior to retirement can make a substantial difference in how much I must rely upon retirement savings and things like Social Security to keep me financially afloat during this time.

Inflation

Inflation can be one of those aspects of retirement that's difficult to gauge. It's almost bound to be an expectation that's on just about every retiree's list; and with the government quoting one number, but many of us experiencing numbers quite different from their reports in our personal lives, inflation can be a factor that ties in tightly with our individual lifestyles.

In order to plan and prepare for this aspect of retirement life, I track our family's expenses closely. This way, I can develop a year-over-year personal inflation rate that ties to our particular lifestyle and not what the federal government assumes is our average lifestyle. Therefore, I get a more exact number that fits our situation and that I can use to better plan for how to draw down against our retirement savings as well as how and where to put our retirement savings to use.

Social Security

I'd like to think of Social Security as an expectation in retirement; however, with the way the plan is being administered at this point, it might not be. With current expectations for Social Security only to be able to pay out 75 percent of total estimated benefits by 2033, I have reduced my expected dependence upon this aspect of my retirement planning.

While I have taken my estimated Social Security benefits into consideration and gauge their progress annually, I also reduce the number provided to me by the Social Security Administration by 25 percent, and I use only the current estimates -- not those provided in future value numbers -- in an effort to decrease how cost-of-living increases may or may not come into play with such estimates.

Market Issues

Then there are of course certain expectations that come along with investment markets. Whether it's in the housing market or stock market, there can be plenty of uncertainty that comes with investing in either. And uncertainty in retirement could lead to trouble.

In an effort to better stabilize our own retirement plan when it comes to such uncertainty, we have taken several steps. First off, we downsized from a larger home that cost us about $300,000 to one that cost about half the price at $140,000, taking our principal from the first home and using it to help us buy the current property outright. While this doesn't eliminate the possibility of our home losing value, it does take some of the risk of us being underwater or foreclosed upon out of the situation. Moving forward, we hope to be able to avoid having to take on a mortgage and keep it that way until retirement, not only helping us to reduce risk, but to avoid yet another large expense by way of a monthly mortgage payment as well.

With the stock market, it's not as simple. While I find it hard to eliminate risk in this area, since it's almost a necessity these days to include the stock market in our retirement planning, I have tried to reduce it. By putting more of my retirement account into a lower-risk income fund that pays a regular and fairly stable monthly dividend -- no matter if the market goes up or down -- I have better stabilized my retirement account and taken some of the risk out of the equation.

*Note: This was written by a Yahoo! contributor. Do you have a personal finance story that you'd like to share? Sign up with the Yahoo! Contributor Network to start publishing your own finance articles.

More From This Contributor:

5 Websites that Could Save You Money

How I Differentiate My Blog

Preparing to Publish My First E-book

Disclaimer:

The author is not a licensed financial professional. The information provided in this article is for informational purposes only and does not constitute legal or financial advice. Any action taken by the reader due to the information provided in this article is solely at the reader's discretion.

Sources:

Brandon, Emily. MSN Money. "Retirement expectations vs. reality". March 11, 2013. http://money.msn.com/retirement-plan/retirement-expectations-vs-reality. April 3, 2013.

View Comments