You’ve likely been working towards retirement for a long time and are eager to set your own schedule and enjoy the freedom to pursue your passions. Retirement is the time to enjoy reaping the rewards of your hard work, however, there are financial risks that are unique to this phase of life. Uncertainty and the need to adjust when challenges arise can be problematic for retirees but there are potential solutions to help address these risks and mitigate against their negative effects.

Market uncertainty

Loses early in one's retirement can have negative consequences.

Learn about market uncertainty

Inflation risk

See how spending power can change in different inflationary environments.

Learn about inflation risk

Longevity risk

Fear of outliving one’s assets is common for retirees.

Learn about longevity risk

Market uncertainty/Sequence of returns risk

Significant losses or depletions to one’s retirement portfolio early into retirement could derail one’s plans by diminishing a retiree’s nest egg. This is known as the sequence of returns risk.

Early losses or significant withdrawals occurring early in retirement after a market downturn can have severe consequences to a retiree’s portfolio. Because any possible future gains would now accrue off a smaller base, a retiree may not have the time to benefit from a market recovery, particularly if they need to make additional withdrawals to their portfolio.

Early negative returns could affect future income:

Inflation risk

In the current inflationary environment, one’s purchasing power is reduced on vital goods and services. This can be particularly hard on those whose retirement income isn’t keeping pace with inflation. Compounding this problem, retirees experience inflation at higher rates than other consumers because so much of their expenses can involve health care.

Inflation could make future expenses rise:

Longevity risk

Fear of outliving one’s assets is common for retirees. For those who will live off their accumulated savings, it can be challenging to develop a spending strategy that ensures they will have adequate means to last for 20, 30 or 40 years. Many Americans underspend their savings to ‘self-insure’ their retirement while others spend too aggressively and deplete their savings. 

Probability of a healthy 65-year-old living to various ages:

Not all risks can be avoided, but some can be mitigated. By working with a trusted financial professional, you can discuss your unique circumstances and how best to prepare for the challenges that may lie ahead.

To learn more about protecting assets and generating income for better retirement outcomes, speak to a trusted financial professional, or learn more about solutions that may help.