Managing Your Money

The Risks to Retirement Have Changed



The good news is that Americans on average are living longer than ever. The bad news is that Americans on average are living longer. Running out of assets before running out time is one of the biggest fears Americans have in retirement. Consider designing a retirement income plan that takes into consideration social security benefits, pension benefits and personal savings with the income you’ll need to stretch your income for as long as you live.

Interest Rates

Interest rates have been historically low since the financial crisis in 2008. Savers who used to live off of the interest on their bank CDs have not been able to do so. However, many American retirees have benefited from the lower rates if they invested in bond fund funds. 2013 proved to be a wakeup call for bond fund investors as the Federal Reserve signaled that interest rates are likely to gradually return to their historic norms. That means that the interest paid on your bank CD and savings account will see a boost in the interest earned. However, millions of Americans invested in bond funds are at risk for a loss in principal as interest rates continue to rise. Some options to consider may be floating rate bond funds and convertible securities funds.


Inflation has been lower in recent years compared to the historical longer trend. However, one area that inflation has been and continues to be higher for retirees and all Americans is health care. It remains to be seen the impact of the Affordable Healthcare Act (aka Obamacare) has on health care inflation but, the fact remains that Americans on average spend more on healthcare as a percentage of their income in retirement than before. Having diversified sources for your income as well as having a diversified portfolio of investments to offset potential inflation is strategies all retirees should consider.

Long Term Care

No one likes to talk about Long Term Care risk. No one wants to picture themselves having to need help and being elderly. As noted above, Americans are living longer than ever. If you live longer, you will slow down and need help with day to day activities. If you need help, it will cost money. You will be taken care of if you are disabled in old age, but, the question is how much control you have over who takes care of you. Long Term Care Insurance is one way to pay for that care when it is needed. However, by the time most Americans start to think about the need for Long Term Care Insurance it is usually too late because the cost can be too high for the average retiree. The best time to consider Long Term Care Insurance is in your fifties. You are healthier and the premiums are much lower compared to when you reach your mid-sixties.

The Bottom Line

All of these risks are addressed as part of a comprehensive financial plan. The best approach is to work with a Certified Financial Planner® professional who will provide a customized plan to help you understand the risks and provide a roadmap for a successful retirement.

To find a CFP® professional go to Financial Planning Association of MA webpage:

John F. McAvoy, CFP®, AIF® is a member of the Board of Directors for the FPA of MA and is the principal at Waterstone Retirement Services in Canton, MA
Securities offered through Investors Capital Corp. 6 Kimball Lane, Lynnfield, MA 01940 Member FINRA, SIPC

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