What Are the Risks in Retirement?

  • March 3, 2016

Money Matters (March 2016)

By Chuck Dudley

 

Know the Risks During Retirement

couple3My good friend and associate, Byron Moore of Argent Advisors in Ruston, La., is a wonderful writer and has an ability to hone in on the ideas that are most important to people having a real desire to improve their finances.

So this month, I’m going to use many of the ideas about risk in retirement he wrote about with his permission! Thanks Byron……

QUESTION: What are the financial risks I need to be concerned about when I retire?

ANSWER: Most of the same ones you have now, plus a few more.

If you are about to retire, you probably have more money than you’ve ever had in your life. You’d think that would equal security, right?

But it doesn’t because retirement is also accompanied by the reality that you may never earn another dollar in your life. Your working days are over. So most retirees find they face even more financial risks than they did when they were working and had time to make up for any mis-steps.

Here are a few retiree financial risks I commonly see:

  • • Longevity risk. I might outlive my money. Women experience this more often since they are the ones (on average) that last longer.
  • • Market volatility risk. I might lose my money. I probably don’t need to elaborate on this possibility these days.
  • • Interest rate risk. I might earn too little income off my money. We are all right in the thick of this one.
  • • Tax increase risk. I might be able to keep less of my money. No one knows the future, but with Social Security, Medicare and Medicaid in financial trouble, higher taxes are certainly a possibility.
  • • Inflation risk. I might be able to buy less with my money.
  • • Liability risk. I might lose my money in a lawsuit.
  • • Healthcare risk. I might spend too much of my money on healthcare, including long-term care.
  • • Human nature risk. I might experience any one of the above risks and do something really stupid—like panic or get greedy.

There are two common reactions to a daunting list such as the one above: denial or defeat.

We either choose to ignore, or we get overwhelmed and we choose to give up.

Both of those are poor choices that won’t make anyone happy for long.

I’d like to suggest a third reaction: decide… to make a plan. It won’t be perfect, but it is likely to be much better than what you now have.

Such a plan combines cash flow, spending, insurance, savings, tax planning and investment management, and the creation of synergy throughout the plan.

The better you plan before you retire, the better you’ll sleep after you retire.

ACTION PLAN

If you really want to make sure you have right ideas for moving forward in a positive manner, we will listen. We’ve been able to help families and businesses learn to use money wisely, and we’d like to help you too. We would be honored to visit with you about how to help you and your business. My number is 501-318-0010, or you can send me an email at cdudley@argentfinancial.com.

An hour of your time spent analyzing your situation might make a lifetime of difference

Arkansas Insurance Producer # 1005698

That’s all for this month! If you’ve enjoyed what you read, please share Money Matters with a friend, family member or loved one.

Sincerely,

Chuck Dudley