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Estate Planning in Raleigh: 4 Risks to Consider When Planning for Retirement

There are generally two main reasons why you would start the process of estate planning: to protect any minor beneficiaries in your care or to protect adult beneficiaries from making bad decisions. As part of that process, your finances are reviewed and your retirement plan is taken into consideration. That said, our world has dramatically changed since the start of the pandemic and financial advice given a year ago may or may not be so accurate anymore. Therefore, today we'll discuss some financial risks to consider when estate planning in Raleigh so you can enter retirement with confidence.

estate planning in Raleigh1. The Market Could Experience a Significant Drop

If you've paid any attention to what's going on in our economy, you know that things are out of balance. The housing market is about to burst. Inflation is through the roof. Manufacturing supply can't keep up with current demands. As such, it's quite possible that there could be a significant market drop shortly before or early in your retirement, depending on when you plan to retire.

A sudden market drop when you're so close to retiring can be devasting because there is less time to make that money back up. We honestly don't know what the market is going to do, but it's something we consider when estate planning in Raleigh.

One way to avert this risk (at least partially) is to begin moving some of your investment portfolios into more conservative investments as you move closer to retirement age. Typically when you're "young," you can afford to take on a little risk, but it's natural to modify your investment strategy as you near retirement age. Rather than trying to make incredible gains, focus on maintaining what you have. 

2. Inflation could impact your long-term spending power

Economists love to talk about inflation, particularly when it relates to the price of goods and pay rates. But for purposes of estate planning in Raleigh, let's discuss how inflation affects your spending power as you enter retirement.

In the process of estate planning, retirement is often top of mind. Everyone wants to know what that magic number is that they'll need to live a certain lifestyle for a period of time after they retire. Unfortunately, you also have to consider what inflation rates will do to whatever amount you've saved. For example, let's say you saved $1 million for retirement. You plan to withdraw 4% ($40,000) per year for living expenses. That $40,000 won't go nearly as far in 10 years as it did in the first year due to inflation. Therefore, when we are discussing your estate, we'll also need to create a financial plan so that you can comfortably enjoy your retirement.

3. Unexpected Medical Expenses Have to be Considered

Most of us expect health-related issues to occur as we age, but Covid-19 really changed the game for all of us. That rainy day fund you've been putting to the side for years to cover unexpected expenses could easily be drained in the blink of an eye as you pay for hospitalizations, visits to specialists, or expensive prescriptions. Furthermore, if you ever require long-term care, your retirement account could be depleted long before you expected it.

In addition to saving more, while you're estate planning in Raleigh, you may also want to purchase long-term care insurance to protect your assets from an unexpected medical situation.

4. What if You Outlive Your Assets?

Typically, the intent behind estate planning in Raleigh is that when you pass away, you have assets to pass down to your beneficiaries. However, people are living longer than ever before (even with Covid-19), which means that it's quite possible that you could outlive your money. For example, when you started saving for retirement, you might have saved just enough to live for 10-20 years. For most 65-year-old retirees, this means that they have enough money to live until they are 75-85 years old. But what if you live to be over the age of 90?

If you are a healthy adult, you should plan to live a long, healthy life. While the average adult might only live until they are 80 years old, it's always better to have too much, than not enough.

If you are interested in starting the estate planning process, be sure to contact one of our estate lawyers in Raleigh NC, at Eldreth Law Firm PC. We are estate planning lawyers that can aid in helping you and your family makes the right choices for your loved ones.

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