What Is The Truth About Retirement Risk?
Why would you care about risk? You’re retired now, you left risk behind you at the workplace. Surprise! You may have left workplace risk behind you but not all risk.
You did not leave retirement risk behind you and retirement risk is more critical than any workplace risk because it can have a dramatic impact on your entire retirement.
Be Aware Of Retirement Risks
Can you avoid it, no, but you can learn how to protect yourself from it. There are several different types of risk and each one impacts your retirement income differently.
Risk #1 – Financial Security
The risk that you will run out of money. Your life expectancy is unpredictable so you run the risk of living too long thus outliving your retirement income. What can you do?
Solution To Financial Security
Put some of your retirement investment money into an annuity. You cannot outlive annuity income. Annuities provide you a guaranteed stream of income; sometimes for the rest of your life.
Risk #2 – Market Risk
The risk that you will be unable to preserve your principal due to the impact markets can have on your retirement investments.
The stock markets go up and down; interest rates fluctuate; markets crash. All of that is beyond your control. If you are relying on market returns to provide you financial stability during your retirement, you are living on the edge. To make your housing, food, clothing, health care and insurances all dependent upon the market sustaining continual positive returns is very risky. What if the market disappoints you?
Solution To Market Risk
Balance safety with the need for high returns. Diversify, diversify, diversify.
Spread your retirement investments between stocks, bonds, cash, real estate, other fixed investments and guaranteed income investments. Do not put all of your investments into one type.
Risk #3 – Inflation Risk
The risk that your money decreases in value so you do not have enough money. You may enter retirement with enough money to last as long as you do but after inflation devalues that investment money you may end up not having enough money after all.
When the purchasing power of your money buys less and you are living on a fixed income because your paychecks have stopped, what do you do?
Solution To Inflation Risk
Annuities can be used to hedge against inflation, but only if you add the inflation guard at the time of purchase.
Risk #4 – Health Risk
The risk of losing your health is an ongoing risk. Failing health can happen to anyone. Unexpected health care needs can occur at any time and sometimes be expensive. If you do not have the proper coverages, health risks can wipe you out financially.
Solution To Health Risk
One, buy a long-term care insurance policy. Two, purchase a supplemental health insurance policy. Three, you can always work part-time for an employer that provides health insurance.
You cannot escape retirement risks; but you can learn the facts about them and protect yourself from any damaging effects.