One of life’s guarantees is that there will always be surprises.  Especially when it comes to planning for retirement.

Last year we experienced several sudden downturns of the market.  Meanwhile, interest rates have imperceptively crept upward, thrashing bonds.  One way to mitigate this is to be sure you have enough liquid assets in emergency reserves.

Be sure that the benefits report from your employer shows the payout assumption for the joint-and-survivor option – most people opt for this choice.  Use this number in your planning.  This option can reduce your pension amount by as much as 20-25% from the single life option.  You’ll need to make up this amount elsewhere in your portfolio.

Lately, inflation has been low historically, but this won’t always be the case.  Over 25 to 30 year in retirement, inflation will erode your purchasing power.  Prices can increase for groceries, gas, telephone service, and services such as plumbers and other repairman.  If your pension doesn’t increase with inflation, it’s purchasing power can be cut almost in half during your retirement.

Social Security payments do increase with inflation, but not enough.  It’s based on a price index that isn’t the best measure of the costs seniors face.  Also, medical and prescription costs increase with age and rise faster than inflation.

Taxes are paid on distributions from some retirement vehicles.  Also, your tax rate may not drop after you retire.  And let’s not forget the so-called ‘hidden taxes’, and rising property taxes, and taxes on your Social Security benefits, and taxes when you sell stocks and mutual funds.