The Risks in Retirement – What to Expect

Approaching retirement, that thing you’ve worked all your life to get to, can look awfully scary once you are finally getting close to the long awaited goal. There are many things to think about, and the major things that concern people all have to do with finances. These include the fear of losing their money, the fear of outliving their money and the fear of making bad investments. People also fear that their standard of living could go down if they have to tighten up more on their bills and spending.

What Are Some of The Risks Retirees Face?

  • The Longevity Risk

    Even though the average life expectancy in the United States is 78, it is nearly impossible to predict how long an individual will live. It is wise to look into investments that can help protect you even at advanced ages. These include reverse mortgages, longevity insurance which usually starts paying you around age 85, and managed payout plans.

  • Inflation Risk

    Many people don’t factor in inflation while planning for retirement, but this is one of the biggest risks for retirement. If you are not saving for retirement with inflation in mind, you could run into trouble when you have not saved accordingly, making your retirement much more difficult.

  • Interest Rates

    This is also a difficult one to predict, because who knows where interest rates will take you? It is recommended that to help prepare for this to invest in immediate annuities, long-term bonds, mortgages or dividend-paying stocks.

  • Business Risks

    If you have retirement funds through your employer, you can’t always guarantee that it will remain safe because it is hard to predict whether or not the company will dissolve eventually, or even go bankrupt. You can help gauge your employer’s risk by checking out their credit rating, but you still need to be aware of this risk.

  • The Stock Market

    Another volatile investment, the stock market can fluctuate suddenly, reducing your retirement funds by quite a bit if you have these types of investments. The best thing to do is to diversify your investments across several individual stocks, in order to try and cover any losses that may occur. Older investors may want to limit their stock market investments since the market can be so unpredictable to lower their risks.

Although those are some of the main risks, other things like unexpected health care costs, death of a spouse, and the inability to live on your own anymore can all cause big risks for your retirement as well.

Be as Prepared as Possible

Although it is nearly impossible to be ready for every single risk that might come your way during retirement, there is a lot of ways to educate yourself before retiring so that you can try to be as prepared as possible. The more you take care of before retirement, the easier getting through that time of your life will probably be. Talk with your financial advisor, and make sure and discuss these things with your spouse as well so that you can both be prepared for many of the risks and challenges you are likely to face during retirement.

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