Retirement Risks … and Mitigation Strategies
Aug 25, 2022 • Written by Paul Staib | Certified Financial Planner (CFP®), MBA, RICP®
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A critical component in the development and implementation of a comprehensive retirement plan includes the assessment and mitigation of risks. The table below details several of the more common and impactful factors that may potentially put your retirement at risk. While these factors are not the only things which could impact your retirement, they are good areas on which to focus. Recognizing and planning for these risks can greatly improve the odds of a successful retirement.
Risk Factors
| RISK FACTOR | DESCRIPTION | MITIGATION STRATEGIES |
|---|---|---|
| Longevity Risk | The risk of living longer than estimated and running out of retirement savings. The earlier you retire, the potential greater risk exposure | * Estimate Your Life Expectancy * Delay Retirement * Delay Social Security * Pension Optimization * Systematic Withdrawal Strategy * Asset Allocation * Purchase Annuity(s) * Utilizing Home Equity |
| Inflation Risk | The risk of underestimating the effects of inflation on expenses through the retirement period is one of the biggest challenges of retirement planning | * Asset Allocation * Systematic Withdrawal Strategy * Delay Social Security * Purchase Annuity(s) |
| Market Volatility Risk | Sequence of Returns risk: the risks associated with investing and withdrawing money at a point in time when the balance is down due to market performance | * Systematic Withdrawal Strategy * Asset Allocation |
| Health Care Risk | The risk of underestimating the effects of aging and not adequately planning for health care related expenses, including long-term care | * Health Savings Accounts (HSA) * Long-Term Care Insurance * Asset Allocation |
| Public Policy Risk | The risk of unanticipated change in government policy with regards to tax law and government programs such as Social Security and/or Medicare can have a negative impact on retirement security | * Increased Personal Savings * Health Savings Accounts (HSA) * Ongoing / Periodic Planning |
Risk Mitigation Strategy
The table below illustrates the same information, but is organized around the specific strategies and which retirement risk factor(s) they help address.
| MITIGATION STRATEGY | Longevity Risk | Inflation Risk | Market Volatility Risk | Health Care Risk |
|---|---|---|---|---|
| Delay Retirement | X | X | X | X |
| Delay Social Security | X | X | ||
| Annuity(s) | X | X | ||
| Asset Allocation | X | X | X | X |
| Systematic Withdrawal Strategy | X | X | X | X |
| Health Saving Account(s) (HSA) | X | X | X |
Paul Staib | Certified Financial Planner (CFP®), MBA, RICP®
Paul Staib, Certified Financial Planner (CFP®), RICP®, is an independent Flat Fee-Only financial planner. Staib Financial Planning, LLC provides comprehensive financial planning, retirement planning, and investment management services to help clients in all financial situations achieve their personal financial goals. Staib Financial Planning, LLC serves clients as a fiduciary and never earns a commission of any kind. Our offices are located in the south Denver metro area, enabling us to conveniently serve clients in Highlands Ranch, Littleton, Lone Tree, Aurora, Parker, Denver Tech Center, Centennial, Castle Pines and surrounding communities. We also offer our services virtually.
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