Understanding Retirement Risks

2.4 minute read • 

March 16, 2021

Before you retire, consider the risks you may face and how you can prepare for them.

After decades of carefully balancing family, work, and physical and mental health, retirement should be a relaxing and well-deserved reward for a lifetime of hard work doing all the fun things you imagined.

Here’s how a Vanguard personal advisor can help you plan for 5 common risk factors you may encounter when planning for retirement.

market risk

What is it – an unexpected change in investment returns, inflation or other market variables.

How to prepare for it – make sure your asset allocation is aligned with your goals. Funds designated for retirement expenses may be distributed differently than funds designated as your loved one’s estate. And don’t try too quickly to reduce market risk – with some goals it might be a good idea to be more aggressive!

How advisors can help you – They will tailor a financial plan to your specific needs and goals. They will run your portfolio through 10,000 what-if market scenarios to ensure it is prepared for various future market conditions.

Longevity and mortality risk

What it is – A longer or shorter lifespan than your asset.

How to prepare for it – Consider an annuity, which can address both of these risks by providing you with a lifetime income stream and guaranteed minimum payments through riders. You can also consider life insurance if you are concerned about the burden on your family.

How an advisor can help – Your advisor can recommend withdrawal strategies for your retirement savings that can meet your spending needs. They can also tell you if it makes sense to monetize some of your assets.

health risk

What is it – the inability to pay for your health care.

How to prepare for it – Get a personalized estimate of your expected costs and choose the right health insurance for your needs. How an advisor can help – Your advisor can provide you with a personalized estimate of health costs, including long-term care, and help you choose the health insurance plan that’s right for you.

event risk

What is it – an unforeseen event with a significant financial impact.

How to prepare for it – build flexibility into your spending plan and consider additional insurance to help absorb certain types of shocks.

How advisors can help – Advisors can apply a dynamic spending approach to your plan, allowing you to balance flexibility and predictability.

Tax and political risk

What is it – a change in the rules governing health insurance, savings or retirement benefits or estate planning. How to prepare for it – Make sure your portfolio includes a variety of asset classes and account types, which can give you more flexibility if policies change.

How an advisor can help – Your advisor can provide advice on how tax or policy changes may affect you and suggest possible actions to take.