The four common risks retirees confront are:
Longevity risk—Outliving your money.
Retirees are living longer, so you may need your money to last 20, 30 or more years. Otherwise, you may have to cut corners to avoid running out of money at some point. Careful planning may help manage longevity risk.
Help make your money last:
- Choose a realistic time frame for how long your retirement money needs to last. If you retire at age 65, plan for 30 to 35 years.
- Maintain an adequate amount of stock investments. This can potentially help your savings continue to grow; however, it does come with additional risk.
- Pick a sensible withdrawal rate that you can maintain
Inflation risk—Losing purchasing power.
Money being worth less over time, known as inflation risk, can have a devastating impact on your retirement. This can be true even when inflation is relatively low.
Help maintain your buying power:
- Add inflation-hedging investments to your retirement portfolio.
- Maintain enough stock investments so your savings potentially can keep growing.
- Maximize Social Security payments, which automatically adjust for inflation.