Your Retirement Planning Has Risks
You worked hard to build up your retirement investment portfolio. As a good investor you should be aware of the different types of risk that can affect that portfolio, especially your retirement money.
There are many types of retirement investment vehicles; 401k plans, IRA, annuities. Remember that regardless of the type of investment vehicle you have invested your retirement money in, your money is rarely guaranteed against risk; and your money is rarely guaranteed against losses.
There are different kinds of investment risks. There are risks to your money before retirement and there are also risks to your money during your retirement.
Become a better investor, make yourself aware of the risks to your retirement money before you retire so that you can make any necessary adjustments along the way.
Risks Before Retirement
Inflation, which shrinks the value of your money. You have no control over inflation and yet it has a big impact on your investment portfolio.
The impact of inflation can sometimes delay the time frame you plan to retire. You may have to extend your planned retirement dates if inflation shrinks your portfolio to the point of
Market losses can be the result of a number of things, all of which you have no control over. Unfortunately, your lack of control against market losses does not prevent you from being indirectly impacted by them.
Your stocks, bonds, mutual funds, certificates of deposits, savings accounts, annuities and even some life insurance cash values can all be affected by market losses. Bad markets happen all the time; they are cyclical so you can rarely avoid them entirely; but you can take some steps to offset them.
How To Protect Your Money
So what can you do to protect your retirement investments from pre-retirement risks?
- Invest more money to compensate for the impact of inflation and market losses on your portfolio.
- Increase your investment amounts when the markets are down; stocks and mutual funds are on sale when the market is in a slump.
- Make wiser investment choices; this can help your investments stay ahead of inflation.
- Keep a well diversified portfolio; this can help offset market losses.
- Re-balance your portfolio every 6 months; this will help you buy more stocks and mutual funds when the market is in a slump.
Risks During Retirement
During your retirement you also face inflation and market loss risks but you also have 2 additional risks; the risk of outliving your assets and the cost of health care.
Outliving Your Assets
Regardless of how much money you invest or save during your working years, you still run the risk of not having enough money to last you through your entire retirement years.
If you did not invest or save enough money during your working years, to avoid outliving your investment assets, you will either have to keep working during your retirement or live below your means.
Health Care Costs
Most retirees lose their health care benefits at retirement or closely thereafter. You may find yourself in a situation where you have to pick up the some or all of the cost of health care during your retirement. The risk that you may pay for your health care costs may be more likely since the passage by Congress of the new health care law.
How To Stay Ahead Of Risks
The steps you take today can make the difference in how you live out your retirement years.
We rarely know how much money we will need for our entire retirement because few people know how long we will live. But there are a few steps you can take to get close to investing enough for retirement.
- Invest and save as much money as you possible can during your working years; once you retire you won’t be earning money or at least not as much.
- Take advantage of a 401k plan offered at your work place.
- Invest enough into your 401k plan to take advantage of any employer matching that may be offered.
- Talk with your financial planner about buying life insurance with cash value. You can take a loan out against the cash value if you need extra money for health care or other living expenses.
- Talk with your financial planner about buying annuities. With an annuity you will usually not outlive the stream of income provided from an annuity.