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Unexpected Financial Emergencies Can Play Havoc in Retirement. Do You Have a Coping Strategy in Place?

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As professionals who help people from all walks of life plan for retirement, Rajiv Nagaich and his team at AgingOptions deal with common questions almost all the time. One of the most frequently-voiced worries from retirees and those facing retirement involves financial emergencies and how to handle them, especially when living on a fixed income.

Derailing Your Plans

For that reason, this article we discovered recently in USNews immediately drew our attention. The title is straightforward: it’s called, “How to Deal with a Financial Emergency in Retirement.” According to author Rachel Hartman, concern about how to handle emergencies cuts across all age groups. “Most Americans (55 percent) worry about what they would do when faced with a financial emergency,” says Hartman, quoting a Northwestern Mutual study. However, the stress is magnified exponentially for those on a fixed income. “Unexpected and uncovered emergencies can literally ruin a retirement plan,” says one Connecticut wealth advisor.

Here at AgingOptions we understand the disruption that a financial emergency can trigger, because we’ve witnessed it many times as we’ve spoken with radio listeners and seminar guests. But we have to push the “pause” button before moving on and point out the obvious: the USNews article, as helpful as it might be to some, deals entirely (and very narrowly) with finances. For that reason, the article also unintentionally reinforces a point we’ve made repeatedly, which is that a so-called retirement plan that deals only with your money is indeed a recipe for disaster. It appears to us that the premise behind the USNews article is that your retirement plan can be disrupted by some sort of emergency, but our question is, “What kind of emergency?” Is it a medical need, a housing issue, a family concern or a legal matter? All of those can be dealt with ahead of time if you undertake the right kind of retirement planning. We’ll explain more in a moment, but for now the important thing to remember is that a truly comprehensive retirement plan can go a long way toward eliminating (or certainly reducing) the kind of worry that this article talks about.

Eight Recommendations – Some Better than Others

Let’s proceed and see what recommendations USNews has for retirees worried about financial contingencies. “If you’re retired and facing a financial emergency,” author Hartman writes, “here are some of the best approaches to gather funds, cover the costs and move forward without going into debt.” She lists eight ideas you might want to consider, some of which, we think, are good, and some not so good. For some reason the article omits one idea which we think might be advantageous if you’re 62 and older and own your home: there’s no mention of a reverse mortgage. Here’s a quick overview of the eight USNews recommendations:

  • Tap easy-to-access funds. The point is to use emergency funds first before you dip into a retirement account where you’ll probably take a tax hit and also lose out on earnings.
  • Remove extras from your budget. You might need a few months – or more – of belt-tightening. The more you understand your budget, the easier it will be to economize.
  • Examine your bills. The article suggests, “Make a list of your ongoing necessary expenses, such as car insurance and your cellphone bill. If you haven’t negotiated or requested a lower rate in the last year, take some time to reach out.” These negotiated savings can help create space in your budget.
  • Sell a big-ticket item. The second car, the no-longer-used RV, the boat gathering dust? These can be turned into cash fairly quickly.
  • Think about re-locating. If downsizing was already part of your plan, a financial emergency might be just the trigger to cause you to take action now, not later.
  • Look at life insurance. There may be a long-overlooked cash value hiding in a whole life policy you’ve had for decades.
  • Understand the tax implications. If you decide to take funds from a 401(k) or other tax-deferred account, make certain you get good advice about tax implications. There may be ways of reducing the burden, such as splitting your withdrawal over two tax years.
  • Look for “zero percent” borrowing opportunities. We confess, we’re leery of this suggestion – it seems like a dangerous way to dig your debt hole deeper. The idea is to take advantage of a zero-percent introductory credit card rate, then pay off the balance before interest charges kick in. Frankly, for most people we think this is a terrible idea.

As we said earlier, the one strategy completely overlooked by USNews is a reverse mortgage, specifically a reverse mortgage line of credit. As part of an overall financial plan, this powerful tool can provide just the right financial safety net to cover a wide range of unanticipated expenses. It’s not the answer for everyone, but it’s the right idea for many. Contact our office and let us refer you to a reverse mortgage expert who can answer your questions objectively.

The Power of Proper Planning

We have said it a thousand times and we’ll say it again: comprehensive retirement planning is about more than money. What if you could head securely into retirement knowing not only that your finances were protected but also that you had all your legal ducks in a row, so to speak, so that your estate and your loved ones were adequately prepared? What if your housing strategy were already thought through so you wouldn’t have to worry about an unexpected move? What if you knew you had the right medical coverage in place, both for the immediate future and for the long term? All this is possible when you approach retirement the way we do at AgingOptions, using a strategy we call LifePlanning. Not only will finances, housing, health and legal matters be part of your LifePlan, but so will your family, so you know your loved ones will be there for you as you age.

We encourage you to get the facts about LifePlanning so you can open your eyes to the possibilities it represents. Join Rajiv Nagaich at an upcoming LifePlanning Seminar. We hold these free events in locations throughout the area, so odds are there’s one near you. For a complete list of upcoming events, click here to visit our Live Events page where you can register online for the seminar of your choice. If your dream is to retire with a sense of true security and thorough preparation, look no further than a LifePlan from AgingOptions.  Age on!

(originally reported at

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