Financially Speaking: What is your greatest retirement risk?
By LouAnn Schulfer, AWMA®, AIF®
Accredited Wealth Management AdvisorSM
Accredited Investment Fiduciary®
What is the goal of climbing a mountain? Usually the answer I receive is ‘to get to the top of the mountain’. Actually, that is just the first half of the journey. The greater challenge is getting down from the mountain. In fact, for climbers of Mount Everest, the highest peak on the planet, the descent is where most deaths occur.1 That is a great parallel to retirement planning.
“Accumulation” is getting to the top of the mountain. It takes great discipline and monitoring to be sure you stay on course. “Distribution” is turning your nest egg into reliable lifetime retirement income. Like getting down the mountain, there are significant risks. Market losses. Inflation. Outliving your nest egg. Pension failure. Just to name a few.
The greatest risk for most people is needing significantly more income than they’d planned during retirement. Most commonly, this would be triggered by a change in health. If you plan to live a long life, this is simply a risk that you must think through. It may never happen to you, but if it does, what would it look like if you or your spouse were to need care for an extended period of time? How would that affect your family operationally? Emotionally? Financially? What would be your source of income to pay for the ongoing expenses? What is your plan? Do you absorb all the risk, or do you have a plan to mitigate the risk? How does your plan play out? If you were to make changes to the titling of your assets for example, what could the unintended consequences be? Is it wise to set aside a pool of money “just in case”? If so, how much? And what rate of return do you need to grow your money to pay for care, should that happen? Should you purchase insurance? What kind? How much? What guarantees does the policy have? What if you never use it?
Planning is complicated. Not planning is flat out scary. Would you climb a mountain without properly planning? Would you only plan for the way up? Of course not. Even if you’ve already established your plan, it should be reviewed at least annually to be sure you are on course and that things around you haven’t changed. It’s like pulling out your compass as well as checking the conditions ahead of you on your journey. For, your greatest risks may still lie ahead.
LouAnn Schulfer is co-owner of Schulfer & Associates, LLC Financial Professionals and can be reached at (715) 343-9600 or [email protected]. www.SchulferAndAssociates.com
Securities and advisory services offered through LPL Financial, a Registered Investment Advisor. Member FINRA/SIPC.
(1) https://www.thoughtco.com/