Tags: Forbes | Risks | Retirement | planning

Forbes.com: 4 Common Risks That Can Devastate Your Retirement

Forbes.com: 4 Common Risks That Can Devastate Your Retirement
(Getty Images)

By    |   Monday, 23 November 2015 07:56 AM

Beware baby boomers, there are four common risks that can devastate your retirement, but you can stop that time-bomb if you act now.

“A better understanding of the risks and industry-best practice solutions will pay big dividends in the creation of a more secure retirement income plan,” writes author and Forbes.com contributor Jamie Hopkins.
 
These are the four risks:

Longevity

“Unfortunately, you cannot predict how long you will live, which complicates retirement planning since you will need to secure income for an unpredictable length of time. While the average life expectancy of a male at age 65 is 84 and a female is 86, averages fail to tell the whole story,” he advises. He offers two simple tips: Consider deferring Social Security benefits and the purchase of an annuity.

Long-Term Care

"If you end up receiving care in a nursing home or assisted living facility, it can be devastating financially for both you and your loved ones as such facilities can often cost well over $100,000 a year," he points out. He advises: set up a long-term care plan well in advance.

'Sequence of Returns'


“Sequence of returns” (SoR) risk presents a unique challenge, he says. "While it does not present a serious concern while saving for retirement, SoR rears its ugly head early in retirement when assets need to be sold in order to create income. Investment returns are unpredictable and negative returns in the first few years of retirement can increase the likelihood that one will run out of money," he says. "SoR risk is heavily tied to the volatility of your investment portfolio.  As such, one way to reduce the risk of SoR risk is to reduce the volatility of the investment portfolio, especially when nearing the first few years of retirement."
  
Public Policy

"One of the biggest challenges surrounding public policy risk is the helplessness that retirees feel when the Government decides to raise taxes, cut benefits, or modify Social Security and Medicare.  However, you can minimize your public policy risk by diversifying your retirement savings and not relying on just one source of retirement income," he says. "By maintaining a variety of savings vehicles and tax diversification with Roth IRAs you can minimize the impact that any one legal change will have on your overall plan."

To be sure, Bloomberg reports that the nation’s 401(k) crisis is only getting worse.

Half of U.S. workers lack company-sponsored retirement plans while 45% of businesses with fewer than 100 employees offer 401(k)s, Bloomberg reported.

“The current 401(k) system was designed for a workplace that doesn’t exist for most people: lifetime careers at big corporations that offer benefits,” says Teresa Ghilarducci, an economist at the New School who researches retirement policies.

“Saving consistently — which you need to do for just a modest retirement income — isn’t remotely likely.”

Related Stories:

© 2019 Newsmax Finance. All rights reserved.

   
1Like our page
2Share
Personal-Finance
Beware baby boomers, there are four common risks that can devastate your retirement, but you can stop that time-bomb if you act now.
Forbes, Risks, Retirement, planning
507
2015-56-23
Monday, 23 November 2015 07:56 AM
Newsmax Media, Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved