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Tags: finance, retirement planning, tackling the threats to retirement
 With the way the economy has been going you’re probably wondering what will happen once you stop working. Will you be sunning yourself somewhere in the Caribbean or putting a smile in some giant retail store? You’ve probably seen it on TV—pensions are out, social security is almost bankrupt and the stock market is reeling.
While the those I mentioned are the ones that are getting a lot of airtime right now, there are also others that are just as deadly and yet not in the limelight. Tackling the threats to retirement is important if you want to spend your golden years in the sun.
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Let’s talk about them shall we? Since we already pointed at social security we might as well start with that. A retirement risk is the ever shrinking (on the verge of collapse) Social Security system and the benefits that come with it. Not only is an increasing part of your social security payments taxable, the age at which you can start to get benefits are also increasing.
And of course there has been that ever constant rumor that the program is so beat up that the incoming payments will not be able to sustain the outgoing ones, especially when all those baby boomers finally retire. And of course we can’t deny the retirement risk that is the falling stock market.
Experts note that stock market losses have a major impact on one’s savings. Diversification is the key to alleviating this retirement risk since the more spread out your holdings the less detrimental any loss would be for you financially. This means investing in both high risk and safe investment instruments.
Then there’s the silent retirement risk that is inflation. The thing about inflation is that it sneaks up on you, and for most of us we don’t even notice it – that things cost more to buy now that it used to before. While it may average at around 3% it can go up or down as the economy turns either way.
And since costs for retirees are different than those still working, the effects of inflation will be different – especially since inflation eats away at the very savings you expect to live on. One way to answer this is to invest in instruments whose returns outpace the rate of inflation – of course without forgetting the stock market retirement risk I mentioned above.
And even if you do all that there is still the threat of you outliving your assets. Even if you say the average life expectancy right now in the US is at 78, it doesn’t mean you won’t live longer than that. And women tend to outlive their male counterparts by at least 4 more years, thus they are more prone to retirement risk than men.
Cover yourself by planning for longevity – investments that keep principal so it keeps on earning for you, and putting emergency funding away for such contingencies. And of course one should not forget insurance coverage as well. In the end, the biggest retirement risk is you – either not starting early or even using up all your assets beforehand.
You need to be the one to decide what is important to you because in the end, you’re the one who has to live in the outcome of the decisions you made – sun or jacket that says “Hi, I’m Bob.”
About the author
The author of this article Rick Goldfeller is a successful underground Financial Analyst who has been advising and coaching individuals for many years. Rick recently published a book on how to manage your money and attract Wealth and Financial Freedom. More info on his Finance Planning course is available HERE.
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