Last week we discussed some key risks to retirement. Health care needs, market volatility and inflation can all have negative affects on one’s retirement confidence. Today we will discuss three more key risks to retirement, and how a plan might help combat the anxiety that comes with each risk.
Longevity You are living longer than the generation before you. If you were born in 1950, life expectancy was 68 years old2. Now, nearly 68 years later, you’re expected to live another 17 to 20 years! We don’t want to consider a long and healthy life being a bad thing, but the risk of outliving one’s assets is a great concern in a time of rising life expectancies and earlier retirement.
Unexpected Events Do you know someone who suddenly became unemployed in the last five years? What about family changes – a wedding, a divorce, a new baby? How about a sudden life change – a health scare, a car crash, a premature death? Often times unplanned developments in your life can have a major impact on your finances, forcing you to withdraw money from savings and jeopardize the longevity of your portfolio.
Withdrawal Rate Lastly, there is risk to pulling too much from savings early in retirement. It significantly increases the risk of outliving your money. This happens most commonly when unexpected events occur, or health diminishes without adequate insurance. Recent studies are suggesting a safe withdrawal rate to be 4% from a portfolio5.
These risks can be summarized by one single statistic documented in an annual retirement survey put forth by the Employee Benefit Research Institute. A full 28% of retirees polled say they have no confidence at all in affording a comfortable retirement6. Just 13% of respondents reported being “very confident” that they will have enough money to live comfortably in retirement”6.
If you’re a part of the 87% that is not yet confident, then consider giving us a call. Our process begins with a conversation on what retirement means to you. Retirement is more than just numbers; it’s about the emotions that retirement evokes. So whether you’re already retired, planning to retire in the next few years, or partially retired but working in some capacity feel free to reach out. We are here to align your personal values, vision and wealth.
5Source: Manoj Athavale, Ph.D., and Joseph M. Goebel, Ph.D. “A Safer Safe Withdrawal Rate Using Various Return Distributions (Journal on Financial Planning).”
6The RCS is the longest-running annual retirement survey of its kind in the nation. Sponsored by the Employee Benefit Research Institute (EBRI), the American Savings Education Council (ASEC), and Mathew Greenwald & Associates (Greenwald), the annual RCS is a random, nationally representative survey of 1,000 individuals.
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