Four Major Risks in Retirement

At a recent luncheon, I heard a woman about 28 or 29, telling an older female friend that she was finally getting ready to move out of her parent’s home and get her own place. Funny, the older woman said, my husband’s parents are getting ready to move in with us.

If you are a parent there are two promises you made to your children out loud or implicitly: (1) I’ll try to help pay for your college, and (2) I’ll never move in with you or ask you for money.

With college costs going up by leaps and bounds, and, people living longer those 2 promises may no longer be true.
As a Certified Financial Planner for over 40 years I have seen financial surprises come into people’s lives they never dreamed. They usually come to me after the event has happened instead of coming in early and laying out contingency plans.

Let us look at a few areas of risk (only 4) to think about in planning for retirement. They are longevity, inflation, volatility (in the markets) and events that threaten your financial security.

Longevity: An example: Joe retired in 1985 at 55 so he could go fishing. His pension check was $652.75 per month. At 62, he took early social security. Today, at age 85, he is in good health, still gets his $652.75 pension plus social security, and, still goes fishing every day. The question: Is Joe going fishing because he wants to or has to? The idea of money losing value over time does not register with most people. If inflation was 5% it would lose half its value in 15 years and then half its value again by the 30th year. So, $6,000 of income in retirement at 65 would only be worth $1,500 in 30 years.

Inflation: Once a person stops taking a paycheck they begin to pay more attention to inflation and spending power. The impact of cash flow, rising taxes, increasing insurance and health costs now become relevant without a paycheck coming in, so, people feel disoriented. I hear retired people say let’s go to an early afternoon matinee (because it is $1 off in the afternoon). In their retirement years all of a sudden rising taxes and gas prices become huge as their incomes become static. Reality:30 years ago, Jack Nicklaus was on the cover of a sports magazine because he had a $100,000 year. Players today earn 10-15 times that much in one tournament. What will your $100,000 income needs look like in 25 years with moderate inflation?

Volatility: The uncertainty of a volatile stock market makes retirees start obsessing over financial details driving everyone around them crazy. The reliance on investment income instead of earned income leads to this obsession. One solution is to work part-time or start a side business before retiring. The dream of retiring on the beach with Mai Tais turns to watching your portfolio value and drinking Pepto-Bismol.

Events: Catastrophic, disabling or unplanned events can upset your retirement mirage. A spouse gets ill, an investment loss, a child needing help, a parent needing attention or money, a divorce or remarriage must be considered in the retirement risk discussion.

I challenge you even if you are 15 years from the cessation of paychecks to consider all the possibilities of life and take proactive approach. Sit down with a professional advisor and draft out various alternative scenarios for you to handle these 4 risks and many others. You have nothing to lose by doing it. If you do not do planning with a professional, yes, you may save a little money but could lose your dignity in the “golden years”. As always, we are here to help.

Remember…discipline or regret!


Watch my new FREE webinar, How To Double Your Social Security Benefits While Reducing Your Taxes By 80% In Retirement, take advantage of the free offer at the end.

Check out our other blog, the Wealthy Future Blog, to learn all the principles of Missed Fortune, as outlined by best-selling author, Doug Andrew. The articles, audio and video programs will provide information which you will find both enlightening and empowering!

You can also visit our website at Founders Group to learn more about how we can help you optimize your assets or provide you with any financial advice.

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