Managing assets for a long life after retirement

Retirement is something many people look forward to. The idea of life without stressful work with time to pursue hobbies, travel, and enjoy life is certainly appealing. There are some barriers to achieving retirement, though, the most obvious of which being monetary. Even after retirement, the stress of potentially running out of money due to outliving one’s assets could very much be present. In this post, we will mention some strategies that could be helpful in managing this issue.

The Society of Actuaries recently created a report about this issue. First, the report recognizes the four major economic risks to retirement. These include inflation, interest rates, financial markets, and employer solvency. Costs of living will continue to rise into the future, so it is important for retirees to plan enough money for that increase. Interest rates must also be considered. The risk of a sudden increase in rates could depress bond values, affecting investments made by retirees. Financial markets also fluctuate, meaning that a diversified investment strategy is necessary. Finally, it is important to consider which employer benefits are secure and which are not. Business circumstances can change, and some benefits could change or be lost.

It is also important to recognize other risks as well, such as living too long, needing different housing and support, having sudden health issues, or even becoming a victim to fraud. It can be very overwhelming to even think about the vast number of risks present in retirement. However, with proper planning, these risks can be mitigated. A Certified Financial Planner may also be a great person to have on your team during this time. Here are some of the potential solutions The Society of Actuaries recommended for some of these problems:

  1. Investing in assets with inflation protection, such as Treasury Inflation-Protected Securities or annuities with inflation protection
  2. Considering income annuities for a guaranteed fixed income
  3. Choosing long-term investments (such as bonds or dividend-paying stocks) for protection from low interest rates
  4. Diversifying investment classes. Stocks, for example, should be held in different industries with balanced amounts.
  5. Considering different pension options such as lump-sum, based on the one’s circumstances
  6. Using retirement resources that pay a certain amount for life (Social Security, immediate payout annuities). Delaying social security may also be a good option if possible, as the lifetime inflation-indexed benefit received will increase.

 

It is important to remember that Elise is on your side and is also able to help you plan for retirement. Feel free to contact Elise (208)918-0201 or email her at danielinsuranceidaho@gmail.com with questions

(Source: “MANAGING POST-RETIREMENT RISKS: Strategies for a Secure Retirement (2020)” by the Society of Actuaries)