4 Common Risks That Can Devastate Your Retirement

20238685_sIn my new Forbes Signature Series e-Book, Retirement Risks: How To Plan Around Uncertainty For A Successful Retirement, I discuss a wide range of solutions concerning the common impediments to a successful retirement income plan. In conjunction with reading the e-book, one should examine four of the most challenging retirement risks that retirees face and discuss some potential solutions. These four risks are 1) longevity risk, 2) long-term care risk, 3) “sequence of returns” risk, and 4) public policy risk. A better understanding of the risks and industry-best practice solutions will pay big dividends in the creation of a more secure retirement income plan.

Risk #1: Longevity Risk

Take a second and think about how long you expect to live.  Do you expect to live an average life expectancy or do you expect to outlive the average U.S. citizen? Unfortunately, you cannot predict how long you will live, which complicates retirement planning since you will need to secure income for an unpredictable length of time. While the average life expectancy of a male at age 65 is 84 and a female is 86, averages fail to tell the whole story. In fact, if you plan to live to the average life expectancy you will be wrong half of the time, which is really not an acceptable failure rate when it comes to retirement planning. Furthermore, roughly 25 percent of people alive at age 65 will live to age 90.  If this comes as a surprise, know that it is normal as most people underestimate their own life expectancies.

However, exceeding your supposed life expectancy puts a significant amount of strain on your ability to meet your income needs throughout retirement.  In fact, longevity risk exacerbates many other risks such as long-term care, elder abuse, and inflation risk. However, there are a lot of solutions available to help mitigate the risk of outliving your money.

However, exceeding your supposed life expectancy puts a significant amount of strain on your ability to meet your income needs throughout retirement.  In fact, longevity risk exacerbates many other risks such as long-term care, elder abuse, and inflation risk. However, there are a lot of solutions available to help mitigate the risk of outliving your money.

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