In Retirement Planning

Retirement Planning - Merkel Damer Financial Strategies Group of Wells Fargo Adivsors

There are risks embedded in every retirement income plan that could lead to the disastrous result of running out of money. The risks apply to every individual regardless of financial status.

 

 

 

 

 

These Include:

  • Longevity Risk (living beyond expectations) - Risk of running out of money over the course of a long-term retirement or the longer-term depleting of a retiree's asset base to a level that is no longer able to support the income requred to cover basic retiremet needs.
  • Withdrawal Rate Risk (i.e. Spending Behavior) - The risk of selecting a long term unsustainable withdrawal rate from a retiree's portfolio causing premature depletion.

  • Inflation Risk (also called purchasing power risk) - Reduced purchasing power or ability to meet basic needs based on income sources that fail to keep pace with inflation associated with a retiree's evolving mix of expenses (e.g. higher healthcare costs).  Assuming 3% inflation, costs can more than double over the course of retirement (24+ years).

  • Health Care/Unexpected Expenses - Failure to develop a comprehensive retirement plan and then monitor and adapt it to chaning market conditions and/or evolving client circumstances can prove very costly, especially in the later years of retirement.  Best made plans cannot foresee everything, so the plan must prepare for both the expected and unexpected with corresponding responsive actions.  Areas that require ongoing monitoring include changes in investment objectives, income sources, spending needs, inflation, time horizons and estate/-tax planning.  Contingency and related funding or insurance planning should include potential expenses related to health issues, long-term care and required additional family support.

  • Market/Return Risk - Market volatility can result in a loss of capital and/or lower-than-expected returns.  Over the long term this might further lead to substantial variations or reductions in retirement income.  Of particular concern for retired or soon-to-be retired investors is not only the level of potential market impact, but also the timing of this risk, know as Sequence-of-Return Risk.

 

The following can have an impact on the success of your plan:

  • Social Security Benefits

  • Medicare

  • Pension

  • VA Benefits

  • Elder Care

  • Philathropic Planning

 

This is why we require an annual update of your Envision® plan to incorporate life changes.