You need to watch out for these risks as you enter Railroad Retirement.
Welcome everyone to another edition of the Highball Advisors Railroad Retirement Whiteboard. My name's John McNamara of Highball Advisors, and today we're going to talk about risks in retirement. I've outlined seven risks that are going to be important in retirement, so I'm going to just go through them. I'll highlight what they are and then some suggestions on how to address them and make sure that they don't affect you. All right? So let's just go right through it here.
Longevity Risk basically means living a very long time, but outliving your money. Okay? Maybe you haven't planned to have your money last as long as you have. Now with Railroad Retirement, you're always going to have that very good base. Assuming you've had a lot of years in the railroad, you'll have that good base of guaranteed income coming in. But depending upon your lifestyle, there's a possibility you might run out of money, so that longevity risk is a big one there. The way to combat that is just understand your spending plan throughout the years. Okay? Understand that. Get that together.
Next one is Investment Risk. Poor returns. Very, very important. Poor returns. Maybe the market's not performing the way you like it, or maybe you aren't in the market and you're missing bull when the market goes up, so those type of things. Or maybe you're not invested properly. The way to address that is just what I do with my clients, just diversify portfolios. We're not taking any bets on single companies or single asset classes. Just diversify portfolios. Very low cost, Don't panic, okay? Markets are going to go up, markets are going to go down, but you've got to spend the time in the market, as they say. So that's how you can address that risk.
Another risk that's been popular the last couple of years is Inflation Risk. Value of your money decreasing, not being worth as much. We've seen that. Some of the ways to do that is, once again, staying invested in things that appreciate in value, stock and real estate. Stocks and real estate appreciate in value. Don't say they correlate one for one. But as far as appreciating assets, those, over time, have been good. You can also look at inflation-linked bonds, things like TIPS, I think that's Treasury Inflation-Protected Securities or something like that, is something, also, to look at there.
All right, next one. Health Risk. Very important. Are you going to be healthy? Taxes and healthcare expenses are the two biggest things. Healthcare, understanding that. A great way to address that is you don't even have to spend any money, it's just your lifestyle choices. Exercise, eat right, that type of thing. That helps the healthcare risk. Have a long-term care plan in place. That doesn't mean long-term care insurance. Just say if something happens, how am I going to fund this? Maybe it is long-term care insurance. Maybe it's through use of funds that you already have. But you have to at least have some sort of plan in there. And then, obviously, with healthcare risks is luck. I mean, you've just got to win the gene lottery, I guess, sometimes. But luck is also very important.
And that kind of corresponds into the next one, it's Family Risk. Responsible for the family. You could have a divorce. Unfortunately, there might be a divorce. Could be an illness in the family. Very tough to deal with. Things that you can look to do is, Roth Conversions are important. Let's say if something happens to you or somebody else, you can try to move some of that money into tax free. Because, remember, if you're married and something happens, the remaining spouse moves down into the single-filing bracket, so, technically, if they're left with a lot of money, their taxes could go up, because the brackets aren't as high. But I talk about it in my Roth Conversion videos. And then, obviously, luck when it comes to illness, again.
Policy Risk is my next one, number six. Government can change the rules on you. I mean, they keep doing it all the time, between regulation and taxes. So you have risk with the government, that's for sure. I recommend tax diversification, having multiple buckets. So have your tax-deferred accounts, tax-free accounts, those type of things will help, even investment diversifications. As you can see, the government will favor, through tax policy mostly and regulation, different segments of the economy. Now we're favoring green energy. You have to be diversified. I guess that goes back to the first point of diversification, the investments. You just don't want to be caught when they're going to change the rules on you. That could get ugly.
And then the last one, as you get older, is the scam risk. All right? What do I mean by that? I don't understand, but there's people out there every day that get up and just try to steal old people's money. I don't know why they do that. I don't know where these people come from, but that's what they do, and you have to protect about that. They prey on the elderly. It's horrible. So you've got to plan for that. Part of that is estate planning. Especially as you get older, some might experience mental decline. The capabilities aren't quite there, so have that plan in place. Maybe a financial power of attorney, a trusted advisor is helpful, or a knowledgeable family member is also very helpful, to help ward off those idiots. Let's just leave it at that.
All right, so these are seven risks. There's probably a couple other ones that I missed out, but I thought I'd just address this and give you something to think about as you are in Railroad Retirement or approaching it.
I hope you found this video helpful. Feel free to reach out to me if you need any help as you get closer to retirement, going through the boarding for Railroad Retirement process, very, very helpful stuff. Click on the notification bell to get the latest video, and please subscribe to the channel. It's really going great. Well over 6,000 now, so very excited.
Until next time, everyone, please stay safe, stay on track, and take care. So long everybody. Bye.
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