Various natural disasters and extreme weather events are impacting more people in recent years. They include everything from earthquakes, hurricanes, flooding, forest fires, volcanoes, and some have threatened more populated areas. The frequency of these events and other disasters is causing people of various ages to wonder if they can save enough for a comfortable retirement.
Until recently, most people’s retirement plans did not include the possibility of natural disasters. Now, when developing retirement plans, you must consider the possibility and how to counter inflation and the rising cost of medical coverage and long-term care insurance.
Stay Away From Potential Disaster Areas
Some areas of the United States are more prone to disasters than others. AARP reveals that many seniors are moving toward these areas in the South, and six metropolitan areas in these states are likely to experience very high heat, hurricanes, and floods.Some southern cities, such as Austin, Texas, had 28 more days of high heat than in 1970. Several of these cities (Myrtle Beach, South Carolina; Wilmington, North Carolina; Houston, Texas; and Charleston, South Carolina—which expects to see an increased loss of 100.4 percent) this year are expected to see more than a 50 percent increase in flood losses by 2050.
Extreme Weather Events Must Be Considered in Your Retirement Plans
People planning for retirement now need to consider the possibility that some extreme weather event or other disaster could happen to them. Some of these events also appear in areas where they had not occurred before.These things point to a reason to save more money for your retirement years, which should also include enough for an emergency fund. You need to have enough for your daily needs and bills, but you also must have a sizable fund for unexpected costs if you go through an extreme weather disaster. Because such an event could occur unexpectedly, keep the money out of a retirement account to avoid penalties.
Calculating the Cost of Retirement
Many retirement calculators are online, but some are better than others. Start by getting an idea about how much you will need to retire. Then add inflation, which historically has been around 3 percent per year. Remember also that Americans live to an average age of about 80 today.Start Saving Money Early
Do not wait until you are over 50 to get started. The power of compound interest can give you many thousands more dollars if you start saving for retirement in your 20s or early 30s. The more time you let your money grow, the larger your retirement account will be when you stop working.IRAs and 401(k)s
Two retirement accounts that your employer may offer are traditional IRAs and 401(k)s. They both provide tax deductions on contributions. Some employers will match your contributions up to a certain amount, giving you an advantage to deposit at least that amount.Roth Accounts Do Not Have RMDs
Money in an IRA or a 401(k) can be rolled into a Roth IRA or a Roth 401(k). These accounts have the advantage of no RMDs, letting you continue to grow your money, and possibly even give it as an inheritance if you do not need it. Taxes must be paid on all money rolled into Roth accounts.Consider a Health Savings Account
A health savings account (HSA) combines a high-deductible health plan and a savings plan. Money not used for medical needs can be withdrawn in retirement and used for any purpose.An HSA is an excellent savings plan for some people because of its three ways to save money. All contributions are tax-deductible, money used for qualified medical expenses is not taxed, and money in the account grows tax-free. The cost of your health insurance premiums is also lower, but remember that your deductibles are higher.
Putting enough money away to cover the possible expenses of an extreme weather event needs to be started right away. Most likely, you should talk to a financial advisor to ensure that your retirement fund can cover these needs and enable you to have a comfortable retirement.
