The Top 5 Risks in Retirement

Outliving Your Money: Susannah Jones died at 116 years, 311 days last May. She was born in 1899, qualifying her as a tri-centenarian and a super centenarian teenager. Is Susannah just an outlier, and an anomaly? Maybe today. But what about the future of human longevity? The fastest growing demographic among seniors are those turning age 100. The average American female is living 88.8 years. That means half of those women will live longer, and more importantly, may outlive their money. If you have any longevity in your family, you need to start imagining yourself living well into your nineties and look for longevity products that will be there as long as you are. 

Healthcare: Even among the healthy, medical bills are costly over an entire retirement. For those seniors with health conditions, it can be extremely expensive even with Medicare and Medicare supplements. If you’re under age 65 and have a health savings account, you’ll want to fund it to the limit and consider securing long term care protection for the future times when you’ll need help.

Inflation: Commodities of life just keep going up. Over the last 6 years Social Security has paid little to nothing in cost of living adjustments. The government inflation calculations don’t even include gasoline and groceries. So seniors shouldn’t depend on Social Security increases to cover your ever-increasing budget items. You’ll need your investments to do that, to give you the edge against inflation.

The Sequence of Returns: The order of returns is a major issue during the distribution period of retirement. The rules of distribution are not the same as the rules of accumulation. Withdrawals from a portfolio during a down market can erode portfolio principle and reduce its ability to generate income. It’s almost impossible to recover from big downward cycles in the market. To solve this issue, you may need to consider guaranteed income from an annuity.

Market Volatility: This is a real threat to any portfolio, but especially those that are depending upon market performance to generate income. Imagine beginning retirement in 2008 at the front end of the market meltdown. Those unfortunate seniors who started their retirement then have undergone a significant set back. And what of Gen X, starting to save for retirement in the year 2000, only to witness the worst decade of market performance, with compounded losses from 2001 to 2003 and then the market meltdown of 2008. You need to hedge your bet with uncorrelated products that generate some predictable returns without market risk.

These five retirement risks are not to be trifled with, so act now to position your retirement for success.