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In 1991 Billy and Akaisha Kaderli retired at the age of 38. Now, into their 4th decade of this financially independent lifestyle, they invite you to take advantage of their wisdom and experience.

Risk Management and Retirement

 

Angela from Reciprocity Labs

Benjamin Franklin said that the only things certain in life are death and taxes. However, if you live long enough, retirement is also guaranteed, and as the Scout motto states, you always have to be prepared. There is a popular misconception that you have plenty of money but little energy and time once you are old.

While there is some truth regarding the amount of time and energy for retirees, the financial part is a bit stretched because the amount of money you will have during retirement will largely depend on the choices you make in your youth.

You can start planning for your retirement if you know the type of risks that you might face. Therefore, letís take a look at some of the post-retirement risks to enable you to develop a risk management plan.

Longevity

Living to a ripe old age is almost everybodyís wish, but sometimes that could change from a blessing to a curse due to the longevity risk. This risk refers to the likelihood that you will grow so old that deplete all the resources you have saved for retirement. As a result, you will be forced to depend on Medicare and Social Security benefits only.

It may appear like something you should not be concerned about but remember that the life expectancy for US citizens stands at 78.7 years. The higher life expectancy means that the longevity risk is high; hence it is better to overestimate how long you will live than underestimate to prevent you from squandering your retirement income.

Now that you know the average life expectancy, you can start making changes. Therefore it could be time you thought about purchasing an immediate annuity because you cannot outlive it.

Health Care Risk

Well, your body is not as youthful as it once was. You experience aches now, and your immunity has gone down; thus, even the slightest infection has you on bed rest. You may assume that the pension and Social Security benefits will be adequate for out-of-pocket medical expenses but keep in mind that your insurance does not cover some healthcare costs.

Medicare does not cover hearing aids and exams to fit them, dentures, and eye exams to prescribe glasses. Such expenses will therefore affect your retirement nest egg, and that could distort the plan you had to live large in your golden years.

You can avoid selling your assets to cover your medical bills by investing in long-term care insurance and making a sound financial plan for you and your spouse.

Market Risk

Market risk is the possibility to make investment losses. While it could be your dream to accumulate wealth through stocks, not everyone can be Warren Buffet, and some of the shares you invest in will crash which will ruin your retirement plan.

The stock market is volatile, and if your investments are affected during the first four years of retirement, the likelihood of you ever recovering from the impact is slim. Therefore, instead of maintaining the high-risk, high-return investment strategy, adopt a conservative one to reduce the massive impact if the market does not do well.

Better still, it would be best if you diversified your portfolio to minimize market risk and have a financial advisor to help with asset allocation. These moves ensure that you have enough liquidity hence avoid selling assets that could bring additional income.

Family Risk

Family risk involves the unforeseen needs of your family members. You could be traveling the world and making memories, but that life could change in an instant when you have to step in and care for your family.

A few instances include paying school fees for kids or grandkids or caring for aged parents when they can no longer sustain themselves.  You cannot leave family behind, but it helps to let them know in advance what you are willing to put up with to avoid draining your retirement savings.

If you plan on helping someone, it is best to keep your retirement savings separate from the money you are setting aside for such causes.

Policy Risk

The Social Security Trust Fund ensures that you have some money every month, but its future does not look promising. The trust fundís cash flow has been negative for the past ten years, implying that it does not collect enough money through taxes.

The negative cash flow has been covered by interest earned since 2016. From 2021, interest will still not be enough to cover the deficit. Therefore chances of the benefits being reduced soon are very high since it is predicted that the fund will be depleted by 2028.

Cutting down on your expenses, saving more, and purchasing long-term insurance policies will see you live to the fullest during retirement since you are guaranteed independence.  If you have a sound financial plan, you might retire early and start going on the adventures you have been postponing due to a hectic work schedule. So, take charge of your life and make the necessary adjustments today.

 

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About the Authors

 
Billy and Akaisha Kaderli are recognized retirement experts and internationally published authors on topics of finance, medical tourism and world travel. With the wealth of information they share on their award winning website RetireEarlyLifestyle.com, they have been helping people achieve their own retirement dreams since 1991. They wrote the popular books, The Adventurerís Guide to Early Retirement and Your Retirement Dream IS Possible available on their website bookstore or on Amazon.com.

contact Billy and Akaisha at theguide@retireearlylifestyle.com

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Retire Early Lifestyle appeals to a different kind of person Ė the person who prizes their independence, values their time, and who doesnít want to mindlessly follow the crowd.

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