The 5 big risks that shape retirement<\/p>\n
\u201cYou can\u2019t assume anything based on account size alone. Instead of giving blanket answers, I try to ask the right questions,\u201d Davin says. Those questions often fall into 5 essential categories.<\/p>\n
1. Longevity: How long does your money need to last?<\/p>\n
Living longer is a gift\u2014but it stretches your finances. Depending on your health and family history, it may make sense to plan for a retirement that lasts well into your 90s.<\/p>\n
2. Inflation: Can your savings keep up with rising prices?<\/p>\n
After several years of elevated inflation, more than a third of Americans (37%) say rising prices are one of the biggest challenges in preparing for retirement, according to Fidelity\u2019s survey.1 That concern is well founded\u2014higher prices can stretch budgets and increase the amount your savings must cover over time.<\/p>\n
3. Health care costs: Medicare? Retiree benefits? Paying out of pocket?<\/p>\n
Health care is one of the biggest unknowns in retirement.<\/p>\n
A person retiring in 2025 may need $172,500, on average, in after-tax savings to cover health care in retirement.2 That excludes long-term care, which can dramatically increase costs if not insured. Watch or listen to Money Unscripted: What is long-term care insurance?<\/a><\/p>\n Most Americans become eligible for Medicare at age 65, but retirees still face premiums, cost-sharing, prescription costs, and potential long-term care needs. Read Fidelity Viewpoints: How to plan for rising health care costs<\/a><\/p>\n 4. Withdrawal rate: Is it sustainable?<\/p>\n A sustainable withdrawal rate is often estimated at 4% to 5%, with annual inflation adjustments\u2014assuming a typical 30-year retirement.<\/p>\n \u201cIf you withdraw 4% from $1 million, that\u2019s $40,000 a year,\u201d Davin explains. \u201cIs that enough? Maybe\u2014if you have a pension or other income. But if you need more than that, you may shorten the sustainability of your savings.\u201d<\/p>\n Fidelity suggests that people planning very long retirements\u2014such as early retirees\u2014consider lower withdrawal rates, around 3%. Read Fidelity Viewpoints: How to retire early in 8 steps<\/a><\/p>\n 5. Investments: Are you positioned for growth potential?<\/p>\n