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The Retirement Risk Multiplier

There’s so much talk in TV commercials about helping retirees “reach their goals,” followed by images of a couple holding hands on a beach, gazing contentedly at a beautiful ocean scene. I get it — most people do mention to me that they’d like to travel in retirement. But do you know what retirees really want? They almost always tell me they want to know they can keep living the lifestyle they are used to living, without the fear of running out of money. As simple as that. But they are looking for the confidence to know it’s possible, no matter how many retirement years stretch ahead of them.

When you think about it, that’s a pretty tall order. According to the Society of Actuaries, for 65-year-old married couples, there is a 72% chance one of them will live to age 85 and a 45% chance one of them will live to age 90. Do you know someone who lived into their late 90’s? I do.

In fact, in retirement planning, we think of longevity risk, or the unknown length of time you’ll live, as a “risk multiplier.” The longer you live, the more chances you’ll experience major financial risks: market corrections, costly declining health, rising taxes, and inflation. According to the National Bureau of Economic Research, the U.S. experienced 11 recessions during the 64-year period from 1945 – 2009. So your investment portfolio would need to weather 4 to 6 recessions in a similar 30-year retirement, while still providing you a comfortable lifestyle and not going to zero. Retirement is not for the faint of heart!

Longer life expectancies make these risks a “when,” not an “if.” And these risks don’t happen in isolation. It’s entirely possible for the stock market to have a losing streak at the same time your spouse gets very sick.

Working with a comprehensive financial planner becomes imperative as you plan for a consistent retirement. Advisors focused on just investing are not going to be able to help you navigate the treacherous financial waters of retirement. We specialize in helping you steer your boat — through the calm currents and the frightening rapids, no matter what’s around the bend.


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