Market Risk
The possibility that investments decline in value.
How Much Retirement Risk Is Appropriate for You?
Risk means different things to different people. A retirement strategy should consider all of these risks — not just market volatility.
Common Retirement Risks
For one retiree, risk may mean losing money in the market. For another, it may mean failing to earn enough to keep pace with inflation. Other risks include running out of income, needing long-term care, paying more tax than expected, or losing access to money when it is needed.
Longevity Risk
The risk of living longer than your money lasts.
Inflation Risk
The risk that rising prices reduce purchasing power.
Interest Rate Risk
The possibility that changes in interest rates affect bond values, borrowing costs, or income opportunities.
Liquidity Risk
The risk that money is not easily accessible without penalties, losses, or delays.
Tax Risk
The possibility that future taxes reduce retirement income or inherited assets.
Healthcare and Long-Term Care Risk
The risk that medical or care expenses consume a significant portion of retirement assets.
Safety Also Has Tradeoffs
Many people want their retirement money to be safe. That is understandable. However, safety should be clearly defined. A strategy may protect principal from direct market losses but offer limited liquidity. Another may provide guaranteed income but restrict access to part of the account. A bank account may provide stability but earn less than the rate of inflation.
There is no financial product that provides maximum growth, complete liquidity, full principal protection, high income, and no risk at the same time. Every strategy involves tradeoffs.
A Bucket-Based Approach
Some retirees divide assets into different categories based on purpose.
Short-Term Money
Funds for immediate expenses and emergencies may be kept in more liquid and stable accounts.
Income Money
Assets may be positioned to produce dependable retirement income.
Growth Money
Longer-term funds may remain invested for potential growth and inflation protection.
Legacy or Care Money
Certain assets may be designated for heirs, charitable goals, or long-term care needs.
This type of structure may help prevent every dollar from being exposed to the same type of risk.
Guarantees and Financial Strength
Some financial products offer contractual guarantees. These guarantees depend on the claims-paying ability and financial strength of the issuing institution. It is important to understand:
- What is guaranteed
- What is not guaranteed
- How long funds are committed
- What surrender charges may apply
- What access is available
- How income is calculated
- What happens at death
- What fees or limitations exist
Finding Your Personal Balance
The appropriate balance between risk and safety depends on:
- Your income needs
- Your age and time horizon
- Your other dependable income
- Your emergency reserves
- Your health and family situation
- Your goals for beneficiaries
- Your ability to tolerate market losses
- Your willingness to accept restrictions in exchange for guarantees
A retirement strategy should not only work on paper. It should allow you to feel comfortable enough to stay with the plan through changing markets and life events.
Schedule a consultation to review how your retirement assets are currently positioned.
We will discuss whether your balance of growth, income, liquidity, and protection still fits your goals.
- (602) 448-0263
- jay@nationalplanningassociates.com
- 1444 S Belcher Rd #164, Clearwater, FL 33764
- Hours: Monday–Friday, 10am–5pm
What Retirement Question Is Most Important to You?
Tell us what concerns you most about retirement. We will contact you to schedule a conversation and discuss whether our planning process may be helpful.