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We go through many changes throughout our lives–some anticipated, and some unexpected. Major events such as marriages and divorces, moving to a new city, health problems, and job loss are just a few of the factors that can create gaps in our retirement funds.

So how can we handle these situations–even the shocking and unexpected ones–in such a way that our nest eggs are protected? Below are a few scenarios you may encounter and what do do if your retirement is suddenly threatened:

1. Long term care needs

Many don’t realize that Medicare does not cover most long-term care costs, which can be significant. It’s especially tough if the partner needing long-term care is the first to die, as the surviving partner may be left with a significant financial burden.

Solution: consider purchasing long-term care insurance, which can help reduce the temptation to dip into your retirement account or go on Medicaid if the need for long-term care should unexpectedly arise.

2. Not working in retirement 

In order to have sufficient funds to last through retirement, many pre-retirees decide they will continue working part-time. According to a recent survey, however, only two in 10 retirees actually follow through with that decision. This often leaves their nest eggs lacking enough assets to sustain them them through their golden years.

Solution: If it’s necessary for you to work in retirement, don’t wait to look for opportunities. Network with others and expand your skill set before you retire in order to find the right fit for your second career.

3. Unrealistic expectations about mental and physical health 

People often assume they will stay healthy throughout their lives, until they peacefully pass away of old age in their sleep. But the truth is mental and physical capacities change as we age. Over half of retirees surveyed in a study thought there would never be a time when they would be unable to manage their money, while a quarter believed they would never have issues with mobility. Unfortunately, there can be significant financial consequences in both of these scenarios.

Solution: Consider how your mental and physical health could have an impact on your financial situation. Include family members in the discussion, and consider pre-designating someone that could efficiently manage your finances if you were to become unable to do so.

4. Early retirement

You may have a number in your head–such as the median retirement age of 65–for when you plan to quit working. But various situations may arise, such as being laid off from your job, medical issues, or other family needs that may push you into retiring earlier than anticipated. This can put a financial burden on some retirees that haven’t saved enough to cover those extra years with no income.

Solution: Talk with a financial professional about a “plan B” that you can execute in the event of an early retirement. It may be a special IRA account that is reserved for such a scenario, or just a different allocation of the funds within your portfolio. It’s better to be safe rather than sorry.

5. No disability coverage

Believe it or not, many retirees lack this vital coverage that protects their retirement savings if they become disabled. Without it, they are forced to access retirement accounts in order to cover the medical expenses that incur as a result of a disability.

Solution: Make sure you have sufficient disability income coverage and avoid dipping into your retirement accounts early at all costs. If you become disabled at an early age, an individual disability insurance policy can be used to supplement employer-sponsored disability. That way you can protect your hard-earned nest egg from tax penalties.

Bottom line: It’s important to come up with a plan that looks ahead more than 10 years down the road. The more you age, the more life changes you may face, and the greater the need to be financially prepared. Talk with a financial professional about the long-term, taking into account risk and all the unexpected situations that may come your way.

Author Ron L. Brown, CFP®

Ron is a CERTIFIED FINANCIAL PLANNER™ and President of R.L. Brown Wealth Management. He specializes in retirement, estate, and business planning for professionals and entrepreneurs. Ron assists his clients with creating a financial plan to ensure they are able to live their ideal lifestyle during retirement and leave a strong legacy for their family. Ron has been featured in The Wall Street Journal, US News, Yahoo Finance, Investopedia, and numerous other high profile financial publications.

More posts by Ron L. Brown, CFP®
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