The top risks that could derail a good retirement plan

  • Look deep into family history, try to anticipate possible health risks, and then ensure against them.
  • Don't rush into a costly divorce when counseling might provide alternatives.
  • Be prepared to downsize spending in retirement.
Life's circumstances and risks can take a bite out of even the best laid retirement plans.
Thomas M. Barwick | Getty Images
Life's circumstances and risks can take a bite out of even the best laid retirement plans.

Ask any experienced financial planner what causes a retirement plan to fail, and they will likely agree that it is never a result of bad portfolio returns. So if a poorly performing portfolio is not the problem, then what is? Some of the answers may surprise you. Here are examples of how life's circumstances can derail even the best retirement plan, and what to do to avoid, fix or repair it.

Health-care risks

With improvements in medical treatment and increases in longevity, an unexpected illness when you are in your 60s, 70s or 80s may drag on longer than it did just a decade ago. One of the first things you should do is to learn how your current employee benefits (or those of your spouse) work and understand how the employer treats retiree health benefits. What will be the implications of that plan in retirement?

If your spouse is covered under your plan only, or vice versa, find out how the spousal benefits will work in retirement. For instance, will the surviving spouse be entitled to continue with the benefits if the employee dies? Having a complete understanding of how the benefits work will allow you to make informed decisions going forward.

Clients should also look deep into their family histories and anticipate what kinds of health problems they may encounter. For example, if you have a family history of heart disease and you're currently treating your own high cholesterol, opt now for those essential medical tests, such as a stress test. Your insurance should cover this, given your family history and current treatment.

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The next step is to project costs for those benefits. A good financial plan can help address some of this risk. With health-care costs of treatment escalating — and potentially less of it covered by Medicare — the financial burdens of a significant health issue can have an adverse financial effect on a retirement plan over time.

Take the necessary actions now to stay healthy and strong. We decide there's no time to exercise at the gym because we have too much work to do, and making money is our priority.

People ignore the "warning signs" from their bodies and are not proactive in tackling potentially serious health problems. They work so hard so they can live well now, and enjoy the fruits of their sacrifices and hard work in the future. But by not dealing with their health issues properly, they end up living with unnecessary pain and suffering. Not to mention the financial and emotional burden they place on themselves and their families.

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The common belief that Medicare will cover the vast majority of health-care expenses in retirement is a farce. A recent study by the Employee Benefits Research Institute estimates that the average "healthy" 65-year-old couple that retired in 2016 would need about $300,000 in additional savings to cover added medical expenses throughout retirement.

If you are proactive about your health now, it can potentially save you tens of thousands, if not hundreds of thousands, of dollars in retirement and save your life. Having a good plan may allow you to anticipate and navigate major out-of-pocket medical costs later. Having no plan could result in a devastating effect on your retirement.


You can have a well-thought-out retirement plan that can be completely undercut by divorce. Getting divorced after age 50 can reduce your income, force you to work more years than you'd planned or require you to find a part-time job during retirement. Typically, retirement assets get split and living expenses increase, thus stretching retirement dollars even more. That pool of money that was going to fund retirement for a couple will be split in half and must now fund retirement for two people living separately. This is far more costly.

Now, I don't advocate couples staying together if they are truly miserable or in abusive situations. But, in other cases, divorce may not be the best solution. The grass is not always greener on the other side. Money spent on counseling to work out differences may potentially save the marriage and will definitely cost less than a divorce.

Lavish spending

If you've made a sizable income while working and are unaccustomed to controlling what you spend, it may be hard to break these spending habits once you're retired. If you find that your financial personality causes you to overspend and spend money irrationally, it might be time to consult with a professional. A retirement-planning specialist, such as a Chartered Retirement Planning Counselor, can help you develop a plan by creating a budget, setting goals and modifying your spending habits.

"Traditional" financial-planning rules state that you should plan to spend in retirement at least 80 percent of what you did while working. But the reality is that new retirees rarely spend less than 100 percent.

"If the long-term spending budget in your plan isn't something you are prepared to adhere to, the chances your retirement plan will fail are much higher."

In fact, the first few years of retirement can often be a "spending party," as retirees feel they finally have the chance to buy their dream car, take those special vacations or do something else they've been longing for during those final years of employment. If you think this scenario might apply to you, your financial plan should factor this in.

If the long-term spending budget in your plan isn't something you are prepared to adhere to, the chances your retirement plan will fail are much higher. Those who cannot adjust to less income will end up with debt that they have no way to pay off, and may be forced back to work.

(Editor's Note: This column originally appeared on

— By T. Michael Martin, principal and financial advisor at Marius Wealth Management

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