10 Tips For A Risk Proof Retirement

Become aware of these common threats to your nest-egg.

  1. Longevity Risk: This is simply the risk of outliving your money. To mitigate longevity risk, consider converting lump-sum assets into guaranteed, lifetime income. As we get older, our ability to accurately judge our own life expectancy is difficult due to the wide range of possible outcomes. There are many unknown factors (health, accidents, loss of spouse) that can influence our life expectancy.
  2. Insufficient Lifetime Income: A sustained period of virtually no interest on safe investments has left many people with insufficient in retirement. And, the evolution from government and corporate pensions to the private sector puts another burden on retirees. Most were unprepared, forcing them to reconsider whether it’s better to have guaranteed lifetime income or to own assets that must be managed.  What percentage of a nest egg should be in lump-sum investments versus guaranteed lifetime income?
  3. Inflation: With inflation rates at historic lows, inflation has fortunately not been a meaningful threat for most retirees in the past several years. However, like un-managed high blood pressure, inflation can cause un-noticed damage. Inflation can be threatening to a nest egg due to limited options to replenish principle. We recommend that our clients assess inflation risk on a regular basis.
  4. Incorrect Asset Allocation: The proper balance of invested assets in retirement is critical.  Many retirement aged people state that a stock market correction keeps them awake at night more than anything else? Learning the right allocation strategies is worthwhile and will prove to be an important benefit when markets do change course.
  5. Rising Medical Costs: Considered to be the threat that can do the most immediate damage to a nest egg.  We have the proper licenses and training to offer annuity contracts that create immediate income and increased payouts during a long-term care crisis.

  • Loss of Spouse & Cognitive Issues – Married couples and single people can expect to deal with the issue of cognitive decline in the aging process. For married couples, the loss of a spouse often compounds these challenges and repeatedly proves to destabilize the management of assets. Traditional retirement planning methods have been criticized for being too complex and too difficult to understand for aging retirees.  Leading economists and professors throughout the world concur about the superiority of annuity income for the purpose of minimizing complexity.
  • Investment Scams: Be careful. I have very good radar for scams. Please feel free to contact me anytime if you are concerned about how your money is invested or for a second opinion.
  • Fees: The more transparency and disclosure, the better. Fees and other charges are similar to taxes levied against your investment portfolio. They add up. Over time, based on a 1% annual fee, a $1,000,000 portfolio will lose $100,000 over 10 years and $200,000 over 20 years; to fees.  One advantage with annuities is that policyholders do not pay commissions from their annuity contracts. The commissions are paid from the balance sheet of insurance companies and they do not affect your individual contract. They are selling costs incurred by the companies.
  • Bad Advice: “No losses” is what retirees want most. We hear that concern on a daily basis and it makes perfect sense. At the same time, too many people have all their retirement assets invested in stocks and other high risk vehicles. Managing a portfolio to maximize income is a completely different objective than growing principal. It never hurts to get second opinions from professionals with different disciplines. It  is good risk management.
  • Market Losses: Once people are in or near retirement, they cannot recover from losses. An indexed, income annuity, will never incur principal losses of any kind. When markets have down years, the worst rate of return is zero.

This partial list of retirement threats is hopefully a good starting point to see where you may feel vulnerable. The goal of our firm is to minimize the threat from any of these. Using the right vehicles and the right strategy, you will gain a peace of mind you find lacking in your current plan.

Please call me at 561-869-4500 or email me, Ted Bernstein, about a complimentary consultation about your specific needs.

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