4 Risks That MUST Be Addressed to Not Run Out of Money in Retirement️

(don’t forget to checkout the video too)

Did you know that retirees fear running out of money in retirement MORE than death…?!

Isn’t that crazy!?

But, it actually makes sense when you think about it.

Nobody wants to spend their final years broke, penniless, living off a small social security check, and having to rely on friends and family members for financial support.

It really is a situation that plagues the minds of many retirees.

So how do you prevent yourself from becoming one of the statistics?

Well, there are 4 main risks that you must protect yourself from in the distribution phase of your retirement planning journey (which is just the fun part of retirement, where you stop saving money and you start spending it)!

The 4 main risks that you must protect yourself from in retirement, are as follows:

✅ Longevity Risk

This is quite literally the risk of living too long, which simply means outliving your money in retirement.

This is one of the first, and most important risks that should be addressed in retirement planning and is often addressed by creating some addition income-for-life to be layered on top of your social security benefits in retirement.

This gives you an income floor, or a baseline level of income that is guaranteed to last as long as you do (and cover all of your necessary expenses in retirement).

Once this has been addressed, the rest of your retirement money can be spent discretionarily…

Or in other words… on all of the fun stuff!

✅ Tax-rate Risk

If all of your money is sitting in taxable retirement accounts you are at risk of having your retirement income slashed by rising tax rates.

Experts expect tax rates to double, which means that your retirement income is at risk of being cut by as much as half (but not if you figure out how to retire completely tax-free)!

So the question here is, “Where would you pull extra money from in retirement to make up for the difference?!”

If you’re used to a lifestyle at $7,000 per month and all of a sudden you have to live on $3,500 because of tax rates, you’re not going to want to do that.

You’re either going to have to cut your spending in half (no thanks!), or pull money from your other retirement assets.

That’s fine, and you’ll do what you have to do, but if leaving some money to your children (or grandchildren) is important to you, then you will likely have a lot less money leftover to leave a legacy with.

✅ A Long-term Care Event

A long-term care event can deplete a retirement portfolio faster than anything (with a price tag of almost $100,000 per year)‼️

This is a huge risk in the later years of retirement and very few portfolios can support an extended long-term care event.

Even if you do everything else right with your retirement planning a long-term care event will likely wipe the majority of your retirement assets very quickly (and 70% of couples will experience some type of long-term care event).

The good news is that a lot of creative solutions have emerged that can allow you to provide long-term care income for you and your spouse without having to risk any of your own money (I just wrote a blog about this a few weeks ago too).

✅ Sequence-of-return (market) risk

This is a statistic phenomenon that happens when all of your retirement assets are in the market.

Like I talked about in this blog, the market is really good at growing your money, but it’s really bad at providing income and protecting you from volatility.

And if the market drops in the early years of your retirement, you are MUCH more likely to run out of money than if it drops later in retirement (this doesn’t affect you while you are saving for retirement, but it REALLY affects you when you start taking income out of a portfolio).

Addressing this risk means leveraging the actuarial, risk-pooling strength of an insurance company for some of your money while allowing the market to grow your flexible, retirement dollars. 😏

Addressing these 4 risks appropriately with provide you with a guarantee that no matter what happens to you in retirement…

….You will never run out money.

Let’s Chat 💬😎