Five key considerations for a sound retirement

There is growing concern that millions of Americans are not prepared for, or even aware of, what is needed for a successful retirement. Part of the challenge is understanding that as people transition into retirement, they face a new set of challenges, or risks, that are decidedly different than those faced in their earlier years, when they were working to save for retirement.  It is particularly important to focus on these risks during this time of uncertainty. We have seen significant swings in the market recently. High inflation, supply chain issues, talk of higher interest rates, low consumer confidence and geopolitical factors, such as the Russia/Ukraine conflict are just a few of the many factors that have contributed to the COVID economy. 

Here are five key considerations to may have an impact on your retirement income sustainability.

It’s not unusual to consider retirement planning as a numbers game – one that focuses on the size of a nest egg, a desired rate of return and how much to withdraw each year to cover living expenses. Yet for most, retirement success is about more than generating a certain income; it’s about managing retirement savings in order to support the lifestyle you want, for as long as you need. For this to happen, those approaching or in retirement must take into account five key risks that they will face over the remainder of their lives. These retirement risks, which are dynamic and interrelated, include:

1. Longevity risk, the risk of outliving your retirement savings;
2. Inflation risk, the risk of having your purchasing power significantly eroded over time;
3. Healthcare risk, the risk that your healthcare costs will cut into your savings;
4. Market risk, the risk that a market downturn will jeopardize your financial security; and
5. Withdrawal risk, the risk that you will deplete your retirement savings too early by taking out too much of your savings, too soon.

There are many factors and risks that can affect whether your savings will last as long as you need them to in retirement, including ill-timed market downturns or unexpected care needs. By not having a plan for how to spend your savings, you could be exposing yourself to these and other financial challenges down the road.

While the five key risks to retirement – longevity, inflation, healthcare, market and withdrawal risk – are common to most retirees, their impact will vary depending upon your particular needs and circumstances. That is why sound retirement income planning needs to be viewed as an evolving process – one that requires insight, careful planning and ongoing review and judgment. Partnership is a key part of the equation.

For more information connect with a wealth advisor