How to Avoid Major Risks and Build a Secure Retirement

Addressing many of the biggest retirement risks as defined by the Society of Actuaries and exploring the steps you can take to build a secure future.

In one of my most recent episodes, my guest mentioned a report by the Society of Actuaries titled “Managing Post-retirement Risk: Strategies for Secure Retirement.” After I read the 36 page report, I decided to break down the risks they identify and provide some suggestions based on my experience as a financial planner after working with hundreds of retirees.

The report categorizes the risks into three groups: economic risks, personal planning considerations, and unexpected and unpredictable events. 

1. Economic Risks:
   • Inflation: Maintaining purchasing power in retirement can be a challenge. Many people find success combating inflation by strategically utilizing Social Security. It might make sense to delay Social Security for the higher-earning spouse, as a means of increasing future income and inflation protection.
   • Interest Rates: There is volatility in interest rates over the years; higher interest rates on investments such as certificates of deposit (CDs) and multi-year guarantee annuities currently offer opportunities for investors. I Bonds are another way to protect yourself against this volatility. Here is a video I made that outlines some of the in’s and out’s of how to invest in I Bonds: https://youtu.be/V8wzYitLJ_Q
   • Financial Markets: Uncertainty in financial markets is a risk that is worth monitoring. Exploring long term insurance is another tactic that can be useful to make sure that you have money available for uncertain times while also having your major health concerns covered.
2. Personal Planning Considerations:
   • Longevity: Having an informed projection of your own longevity can play an important role in planning for a long life in retirement. Too often people make decisions about their retirement without using data. You can create your own longevity projection at LongevityIllustrator.org. 
   • Health Care Needs: Unexpected health care expenses can be a major disruption in your retirement. There are options available to manage this risk, such as long-term care insurance and setting aside funds specifically for health-related costs. When you make these choices, it can be helpful for everyone if you include your family members in the process.
3. Unexpected and Unpredictable Events:
   • Public Policy Changes: The unpredictability of changes in tax policies and can impact retirement planning. One of the ways you can strategically manage your tax liability is by timing your income and using Roth conversions when appropriate.

It is important to maintain a proactive approach to managing retirement risks–using insurance as a tool can also help mitigate potential financial challenges. Instead of settling on the first strategy you come across, you might find one that is better suited to your unique situation if you put in the time to explore different retirement strategies and options.

Year after year, retirees who take a comprehensive approach to retirement planning that takes into consideration factors such as inflation, interest rates, longevity, health care needs, and tax changes say they feel more confident with their retirement. And who needs more stress in retirement?

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Additional Links:

• Cracking the Code: Should I Cash In, Keep or Swap my I Bonds? – Mr. Retirement Video
• Longevity Illustrator
• Society of Actuaries “MANAGING POST-RETIREMENT RISKS: Strategies for a Secure Retirement”
• TheStreet.com article: “Advisers Can Add Social Security to Their Arsenal to Fight Inflation” by Jeremy Keil

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• YouTube: Retirement Revealed
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