15 Retirement Risks You Should Know About

I subscribe to MarketWatch and today I read an article by Robert Powell on 10 Major Retirement Risks. Much of the information in the article references a document by the Society of Actuaries called, “A Guide to Retirement Planning” and a sister report called “The Phases of Retirement and Planning for the Unexpected“.image

Planning for the Unexpected” is a very now term since the release of Nassim Taleb’s great books, “Fooled by Randomness” and “The Black Swan“.

But it is probably one of the most important phrases baby boomer need to keep at the front of their minds when in retirement. It’s another “fridge magnet” item in my view.

“A Guide to Retirement Planning” is a no-nonsense document that is designed to help you identify and plan for potential or actual post-retirement risks.

It is not written by the wealth management industry. It is NOT trying to sell you anything. The reports are free and very informative. SOE has a list of Recently Published Retirement Research.

The report actually identified 15 Retirement Risks. They are;

  • Longevity Risk
  • Inflation Risk
  • Interest Rate Risk
  • Stock Market Risk
  • Business Risks
  • Employment Risk
  • Public Policy Risks
  • Unexpected Health Care Needs & Costs
  • Lack of Available Facilities or Caregivers
  • Loss of Ability to Live Independently
  • Change in Housing Needs
  • Death of a Spouse
  • Other Change in Marital Status
  • Unforeseen Needs of Family Members
  • Bad Advice, Fraud or Theft

They have produced a table of each of the risks where they describe them, whether they are predictable, offer approaches to managing them, and include additional comments.

The section on Stock Market Risk unfortunately really glosses over the subject which is understandable given the objective of the document. I would add in this section you should consider ETFs and have a stop loss strategy in place at all times.

The charts can actually make a good agenda for talking to your trusted financial adviser in order to build your retirement strategy.

The document was published in October 2008. So it is very current. Grab your copy and work through it and then arrange a meeting with your financial planner to discuss it.

I think it is very important to keep up with this sort of report and the research that the Society of Actuaries is doing as a long term project into retirement.

You need to know what is driving changes in the retirement system if you are to have any chance of being on the right side of those changes. For more information go to their web site Retirement 20/20 project.

One final thing if you are looking for something to do this Easter weekend take a look at the software program called the, “Retirement Probability Analyzer” It is designed to,

“….explores in great detail the fundamental question of whether one will run out of money before dying, while maintaining a desired standard of living. The software has been written to compute probabilities associated with a variety of retirement investment and spending strategies. It is intended to serve as a pedagogical tool to help the user develop an intuition for the impact of various asset allocation and annuity purchase decisions.”

Happy Easter 😉

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