The Five Fears of Retirement, part 4 of 5 taken from the entire episode of Right on the Money, Conservative Investors and Savers.
Synopsis The five risks of retirement are: inflation, market volatility, the sequence of returns, health and longevity. Medical advances, lifestyle behaviors and a vision of purpose are fueling the new mortality revolution. That’s the good news! The bad news is longevity in and of itself is not just a retirement risk, but also a risk multiplier. It can exacerbate the other retirement risks that could cause financial instability for retirees.
Content Inflation has been relatively low over the last decade, but it’s also been cyclical. If the inflation cycle were to return, it could erode the purchasing power of the retirement dollar. Market volatility could create turbulent times for retirees, especially those depending on equity-driven income during retirement. Seniors living on their retirement income may be vulnerable to the sequence of early negative returns. Lower returns could impact a retiree if they lived longer than the planned. Living longer would only increase the odds the cycle would overtake a baby boomer senior eventually. Total U.S. health care spending costs was $553,432 for ages 65 to 84 in 2010.1 Many seniors may exceed age 85, only to further increase medical and elder care costs.
The mortality revolution has been fueled by technology and innovations that once appeared to be science fiction, which are now established science. The culture of diet-conscience baby boomers and their exercise programs, as well as other physical activity, is changing gerontology assumptions. But financial advisors are extending their life expectancy assumptions for retirement planning to age 90, some even to age 95.
The risk of outliving your money is not an unwarranted fear for retirees. Watch the interview on acquiring guaranteed lifetime income you can’t outlive with financial advisor and author, Eric Judy, taken from a segment of talk show, Right on the Money. Eric also has co-authored The New Retirement, a Paradigm Shift.
“For retirement income, we must step away from the notion either investments or insurance alone will best serve retirees. More emphasis is needed on the basic forms of insurance products, and how they may behave as part of an integrated retirement income plan.” – Wade D. Pfau, Ph.D., CFA.
Removing longevity risk with a guaranteed lifetime income annuity is the first proactive step in laying a critical cornerstone to the foundation of retirement funding.
1 Source: Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group. Total Personal Health Care Spending by Gender and Age Group, Calendar Years 2002, 2004, 2006, 2008, 2010, in millions of dollars (Latest data available as of 11/23/2015).
Syndicated financial columnist and talk show Steve Savant interviews Eric Judy, financial adviser, best selling author and top online video blogger on Right on the Money Part 4 of 5 taken from the entire episode entitled Conservative Investors and Savers.