There are several risks to consider when developing a plan for managing your assets in retirement. Not all people will have equal exposure to these risks, yet it is important to keep these risks in mind when developing a retirement income strategy.
Longevity Risk is the risk that you will outlive your savings and available income.
Entitlement Risk is the risk that government programs such as Social Security or Medicare will not offer sufficient protection for retirement.
Excess Withdrawal Risk is the risk of an individual drawing down assets too quickly and undermining their retirement income plan.
Market Risk is the risk of losing invested wealth, temporarily or permanently, either because of a market downturn or poor return on investments.
Lifestyle Risk is the risk of having insufficient income to maintain your current or expected standard of living during retirement.
Asset Allocation Risk is the risk of either investing too conservatively or too aggressively and not adequately diversifying assets to sustain a portfolio across market cycles.
Sequence of Returns Risk is the risk of receiving low or negative returns in early years of drawing down a retirement portfolio and increasing the potential of running out of money prematurely.
Inflation Risk is the risk that rising costs will undermine the purchasing power of savings over time.
Medical Expense Risk is the risk of paying for the growing costs of health care related services in retirement.
Tax Risk is the risk of the impact of rising taxes and unforeseen tax consequences can have on a portfolio or on purchasing power.
Personal or Event Risk is the risk unexpected changes to family circumstances (such as divorce, death,severe illness, adult child returning home) may undermine anticipated retirement plans.
Incapacity Risk is the risk associated with deteriorating health. A retiree may not be able to execute sound judgment in managing their financial affairs.
To help address these various risks, talk with your financial professionals about doing a thorough assessment to manage these risks, to discover the potential issues and challenges you may encounter, and strategies.
Source: Insured Retirement Institute