How to Mitigate Your Retirement Risks
We all work about 45 years to reach retirement. But when we stop working, we’re not separated from society nor are we near the time to meet the Grim Reaper (hopefully). So how do we make sure that the money we’ve saved so hard for retirement lasts us through ALL our retirement years?
There are financial risks when you cease working for good. Your regular income is replaced by whatever sizable nest egg you have established plus fixed income from a pension and/or Social Security. You want to be sure that your money lasts and continues to grow and earn interest even throughout your retirement years. So what are the risks and how do you hedge against them?
Inflation
One solidly known risk is inflation. Every year, the value of the dollar goes down. What some individuals don’t realize when they start initially planning for retirement is how they may actually need in future dollars. Today you might say you can live a good 20 years on a $750,000 savings, but in 30 years will you say the same thing? Most likely not.
If you find you have under-saved at the point you reach retirement, you need to hedge against inflation. Financial advisors believe that one of the best ways to accomplish this is to invest a portion of a savings portfolio into stocks. A good equity fund with larger returns can help stretch your retirement accounts even while you are retired. One should only consider this if they are in good health and expects to live past the average lifespan.
Investment Losses
As we have seen recently, retirement accounts can dwindle in value in a near blink of an eye, relatively speaking. In just the last 2 to 3 years, many retirement accounts have lost much value due to a declining economy and descending stock prices. If you find that your retirement savings has lost considerable value when it’s your time to retire, you may want to transfer much of your principal into less risky options, such as inflation-indexed bonds.
Health and Lifespan
Most people can expect to live another 13 to 15 years once they retire around the age of 65. But the actual number of years left depends a lot upon your health. A retiree in reasonably good health may live to be 90 or even 100. What happens if you outlive your available funds?
Stable fixed income sources such as pensions, Social Security, and annuities may be the best way to mitigate against the risk of outliving your savings. These income sources continue for life, and as long as you are alive, they will be there for you.
Retirees in poor health have another risk to manage. Much of their retirement savings may be spent on health care costs and medications. If a person has health issues before they retire, they may be wise to purchase supplemental health insurance that will increase the benefits supplied by Medicare, and even long-term care insurance to help provide an assisted living facility when you cannot live on your own.
The financial risks imposed at and during retirement are never predictable. However, along with planning as best you can ahead of time, there are things you can do during retirement to help make your money last. Always contact and consult a qualified retirement wealth manager like www.kenhimmler.com or retirement asset management company like www.iamllc.biz to help you form the best strategy with your money.
Authored By Kenneth Himmler, Sr.
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