But it can be accomplished with proper planning and a map designed to take us on, if not the most scenic route toward our destination, the most efficient and safest one possible.
So, while it’s important to identify our primary goals on this trip, it’s equally important to identify and know the risks along the way.
According to the American College of Financial Services there are 19 primary risks we need to concern ourselves with as we make our plans. They’re certainly not the only ones, but the ones we feel present the most danger to any retirement income plan.
Those risks can be separated into six categories, starting with running out of money at the end of life which we refer to as Outliving Resources.
No one can predict how long we’ll live. So we’re left trying to figure out how much money we’ll need for an unpredictable length of time. And that also takes into account issues such as inflation and the risk of excess withdrawal.
Also difficult to predict is our health. And so, we must also take into consideration Risks Associated With Aging.
These include costs involving health care, long term care, frailty and unfortunately even the possibility vulnerable seniors will be taken advantage of– or also known as financial elder abuse.
We also must take into account the Investment Risks involving retirement plans. This includes market volatility; the impact of changing interest rates on fixed income investments; liquidity risk and sequence of returns risk.
Also addressed are the risks associated with Work. This includes having to retire earlier than planned; the risk of not being able to get a part-time job in retirement and the risks to a retirement fund when the employer has financial difficulties.
Relationships with Family can also create risks. The early death of a spouse can have a devastating effect on a retirement plan if that’s not built into the plan. Also there could be the risk of unexpected financial responsibility which usually involves a family situation.
Finally there are two Other important issues to consider; timing risk and and public policy risk.
All these risks can certainly affect different people in different ways. So again, it’s important we identify them and prioritize them for each individual based on which risks might create the most exposure.
And so, while they may sound at times like imposing obstacles on our journey, if we are prepared for what’s ahead well in front of us, we’ll be more than adequately prepared to minimize the risks with solutions already in place, creating the smoothest path possible to our ultimate destination.
Over the next few weeks I’ll be describing these risks in more detail and giving you a few pointers on how to overcome them.
If you’re concerned about these risks and their affect on your retirement situation or someone you care abouts situation please share this article or subscribe.
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