Identity theft, market volatility, and paying for long-term care are three financial issues that concern most investors, often especially those nearing retirement. And while there's no silver bullet to ward off scammers, crashes, and care bills, it is important to start thinking about what you would do if faced with one of these scenarios. Here are some tips and general info to help you get started.
Baby Boomers are connected and becoming more so all the time. At the same time, cyber crooks are increasingly trying to steal users' identities and money, ruining victims' credit scores in the process. Identity theft is epidemic: 17.6 million U.S. residents experienced identity theft in 2014.
Cyber thieves use email to phish for identifying information by promising riches or begging for help, and then ask for your checking account information, date of birth, and Social Security number. They also infect computers with viruses and spoofing programs in an attempt to get your personal information. Public computers are a goldmine for cyber criminals who try to trace your web visits. You can lower your chance of identity theft by changing online passwords frequently. Ensure your devices use up-to-date software that protects against viruses and malicious software. Use secure Wi-Fi networks for online activities, and clear your browsing history after using public computers. Never give information to anyone you don't know. Also be aware that agencies like the Internal Revenue Service will never ask for back taxes by phone.
If you become the victim of identity theft, notify your local police. Also inform the Federal Trade Commission at 1-877-ID THEFT (438-4338). Finally, contact the three major credit reporting agencies, the Social Security Administration, and any credit provider or bank affected.
Investment volatility is another fear most retirement plan participants and investors experience. While time helps younger investors weather volatility, those nearing or in retirement may experience a bigger fright when markets rock and roll.
Keeping an all-cash portfolio may help you beat volatility, but it won't help you keep pace with price increases in future years. Some cash, however, may help reduce potential losses when markets fall. Use cash for living expenses instead of selling stocks at their low point; history shows markets typically rebound in time.
Down markets are especially hurtful to older investors, because they don't have as much time as younger investors to wait for a rebound. Reducing your equity investment withdrawal rate, especially if you have a defined benefit pension and other investments to tap, such as bonds, gives you more time to wait out volatility. Supplemental income through temporary work can do the same for you.
Try to resist reallocating all your assets during market volatility. If you diversified according to your time horizon, risk tolerance, and goals, a temporary downturn shouldn’t make you ditch all your equity investments or radically alter your portfolio’s composition.
Long-term care may be top-of-mind for retirees and near-retirees, because the need for this care increases with age. As you get older, it's in your best interest to understand what kind of care is available to you and to research the options that make the most sense for your personal and financial situation. Nursing home care is probably the first option that comes to mind, but there are other scenarios to consider (i.e., in-home care, outpatient services, etc.). And the ways to pay for this care vary almost as much as the care options themselves. Here are a few general terms to be aware of as you begin mapping out your plan:
- Medicare covers a limited amount of care immediately following an illness or injury, regardless of income or assets.
- Medicaid typically covers 100% of many long-term care costs, but only if you have little income and few assets.
- Private long-term care insurance: This option might help you meet some or most related expenses. The best time to purchase this type of insurance is typically when you're 60 or younger. Certain health conditions that become common as we age can make coverage too expensive for some people and may even make the insurance unavailable to others. Beware of the cost and review policies carefully. You may find yourself paying out of pocket for some expenses even with a policy, so you'll need to plan carefully to cover those costs.
- Other options: Consider any tax-deferred or tax-free savings opportunities you have for health care, such as a Health Savings Account (if you are eligible).
If you're ready to learn more and want and to start putting a long-term care plan in place, review these additional resources:
- Long term care: challenges and changes
- How to grow old in your own home
- Aging well: A planning, conversation, and resource guide (PDF)
Concerns about identity theft, market volatility, or long-term care are legitimate—they are real issues retirees may have to tackle at some point in their journey. But being aware of your situation and the options available to you puts you in the best position possible to confront the future head on. Take the steps necessary to safeguard yourself where you can, put a plan in place where needed, and feel good knowing you have done everything you can to protect the lifestyle you've worked so hard for.
Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917