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Diversification does not assure a profit nor does it protect against loss of principal.
Consider Risks
It's important to know the key risks you'll likely face and how to incorporate protection strategies in your plan.
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Outliving Your Money
The biggest risk that retirees can face is running out of money. This is known as longevity risk.
Losing Purchasing Power
The dollar losing value over time, known as inflation risk, can have a devastating impact on your retirement security. Adding inflation hedges to your portfolio, maintaining enough stock investments and maximizing Social Security payments, which are adjusted for inflation, can help.
Declining Market
Market declines, especially early in retirement, can undermine your portfolio. You can balance market highs and lows by having a mix of investment types, a strategy called diversification.
Overspending
Spending in retirement refers to the withdrawal rate you choose from your savings. Taking too much can deplete your savings too fast. Additionally, withdrawals intensify the impact of market declines because they represent funds that can no longer grow when the market does rebound.
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This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.