What Are the Biggest Risks to My Retirement?

We know you've put a lot of time and effort into preparing for it, so don't let an unexpected event or risk stop you from living out your ideal retirement.

Living longer than you expect, an extended illness and/or an unexpected personal liability are all risks that could put a strain on your financial resources. Your financial advisor can help you identify and prepare for these risks and others — before and during retirement — to help you stay on track even if the unexpected does occur.

Risk: Outliving your money

Prepare by:

  • Don't take too much from your investments - We usually suggest an initial annual withdrawal rate of about 4% during retirement. But as a rule of thumb, the longer you expect to live, the lower your withdrawal rate should be.
  • Consider annuities with lifetime income benefits - Depending on how much you rely on your portfolio for income and your spending flexibility, you may want to consider annuities that guarantee an income payment for as long as you live.

Risk: Unexpected health care costs or a need for long-term care

Prepare by:

  • Consider supplemental coverage - Medicare Supplemental Insurance (Medigap) or Medicare Advantage (Part C) may help fill in the gaps for items that Medicare doesn't cover.
  • Budget for long-term care costs - Even if you don’t anticipate needing nursing home care, you should still consider planning for some type of assisted living or home health care costs.
  • Consider long-term care insurance - There are several options that could help pay for long-term health care costs, including traditional long-term care insurance or combining life insurance with a long-term care benefits rider.
  • Putting your wishes down in writing - Powers of attorney, health care directives and living wills can help you outline your wishes for your future care. Work with your financial advisor and tax and legal professionals to create these legal documents.

Risk: Market declines and inflation

Prepare by:

  • Staying diversified- No one can predict how financial markets will behave, but a properly constructed portfolio should generally include:
    • Diversifying your investments among stocks, bonds and cash so success isn’t tied to one company or one type of investment.
    • Sticking with quality investments with proven track records.
    • Keeping your focus on your long-term goals, not on short-term fluctuations
  • Assessing your risk tolerance- Determine how much risk you are willing and able to take, so you can be better prepared to stay on track during the inevitable short-term declines.
  • Being flexible with your spending- If you have the ability, don’t automatically take more from your investments each year for inflation—especially during years when the market doesn't perform well.
  • A CD/ short-term fixed-income ladder- Laddering involves owning a variety of quality fixed-income investments with staggered maturity dates. By doing this, you don't have to try to guess how interest rates will act in the future. While a "ladder" can't protect you from a market decline, it can serve as a source of reliable income should the market decline early in your retirement.

Risk: Personal liability

Prepare with:

  • Umbrella liability insurance - This protection is designed to kick in when coverage on other policies, such as home or auto, has been exhausted.
  • Asset ownership structures - Specific ownership structures designed to hold certain assets, such as a small business or rental property, could potentially reduce your personal liability in the case of an accident or lawsuit.

How we can help

There are other risks to consider when it comes to your retirement. But your financial advisor can walk through different scenarios with you to stress-test your strategy to make sure you stay on track—even if one of these risks becomes a reality.

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