Managing Risk in Your Retirement

by | Nov 22, 2022 | Blogs

Become An Expert on The Four Categories of Retirement Risk

When planning for retirement, it is always important to consider the unexpected. Any number of post-retirement risks, including the earlier-than-expected death of a spouse, a lengthy illness, stock market volatility, and the prospect of outliving your assets, can put pressure on even the most carefully considered retirement plans. Learning about retirement risks can help make managing risk easier.

No matter where you find yourself on the runway to retirement, it is imperative that you conduct a risk analysis to monitor the adequacy of your retirement assets and evaluate the potential impact on your financial security in retirement.

Retirement risks generally fall into four categories:

Financial Risks:

For most retirees, running out of money is the primary concern. Therefore, you should be aware of inflation risk. Anyone living on a fixed income should plan for this, especially as an extended period of unexpectedly high inflation can be devastating.

Likewise, you should consider interest rate risk, as lower interest rates can reduce retirement income by lowering the growth rates for savings accounts and assets.

On the other hand, increases in interest rates can also negatively impact the stock market and the housing market. Stock market losses can significantly reduce retirement savings, with the sequence of good and poor market returns impacting your retirement.

For example, a retiree who experiences poor market returns in the first couple of years of retirement will have a different outcome than a retiree who experiences good market returns.

Furthermore, broker fees and taxes will play a meaningful part in the viability of a portfolio to sustain a certain retirement plan. We discuss this matter more in Series 4 – Advanced Investment Concepts – where we explore investment options, costs and managing risks.

Personal and Family Risks:

Longevity risk is a larger concern for those approaching retirement today due to the increase in life expectancy.

Remember, your average life expectancy at retirement is just an estimate, and many will live longer. While no one should have to worry about not dying soon enough, only about half of today’s retirees will have planned for enough income to live to their projected life expectancy.

Healthcare and Housing Risks:

Managing risk in this category includes medical bills, the need to change living situations, and long-term care – including the cost or lack of available caregivers and care facilities. For example, women are far more likely than men to provide care to aging family and friends … and that amounts to an estimated impact of $7,000 per year on retirement savings.

Public Policy Risks:

Public Policy Risks include higher taxes and reduced benefits from Medicare and Social Security. Having an understanding of how these risks might pertain to you and your retirement makes all the difference when managing risk.

While many risks are out of our control, understanding what the post-retirement risks are and considering them in retirement planning is critical. Don’t use uncertainty about the future as an excuse to do nothing. Instead, try to have a Plan B – or even a Plan C – ready for these risks, just in case you need it. That way you can rest assured that you and your family will be taken care of in both expected and unexpected situations.

When it comes to managing risk associated with retirement, Triscend is here to help. Our core expertise is helping organizations retain key leadership with executive benefits and business protection plans that mitigate risk, reduce costs and generate revenue.

For more information, call (972) 318-1110 or contact us.

Alex Staron Avatar
Ms. Staron serves as Chief Operating Officer of TriscendNP and oversees the integration of company strategies into daily business functions. She also serves as Chief Executive Officer of BenefisCU, a majority owned subsidiary CUSO (Credit Union Service Organization) of TriscendNP. Contact or learn more about Alex >>