Broker Check

A Guide to Retirement Risk Management

December 17, 2023

Navigating the Seas of Retirement:

Welcome to Badii Group Private Wealth Management, where we understand the importance of comprehensive retirement risk management. As you embark on this new chapter of life, it's crucial to navigate the financial waters with expertise and insight. Let’s explore the various facets of retirement risk and outline effective strategies to safeguard your financial future.

Financial Risks in Retirement

Retirement is a time of reflection and relaxation, but it also comes with its share of financial risks. In this section, we'll delve into the potential challenges that retirees may face, including longevity, market volatility, inflation, and unexpected expenses. Understanding these risks is the first step toward developing a robust retirement risk management plan.

Longevity in Retirement

We all want to live long and prosperous lives, so it may sound odd to refer to longevity as a retirement risk. Perhaps a better way to see longevity is as an important consideration. Outliving your retirement savings is the “risk” of longevity.

While broad statistics provide predictable patterns in life expectancies for large groups, the individual experience is inherently unpredictable. The Social Security Administration Life Expectancy Calculator offers insights, indicating that, on average, a 65-year-old man (today) can anticipate reaching 84.3 years, while a 65-year-old woman (today) may live to approximately 86.9. 

Social Security projections go further into these statistics by suggesting that one out of every three of today’s 65-year-olds will surpass the age of 90, and one out of seven will extend their lives beyond 95. The implications for retirement planning become evident when considering a retiree who departs from the workforce at 64 and lives to celebrate their centenary at 100. In this scenario, financial considerations span a remarkable 36 years, exceeding the duration of an entire working career for many individuals. 

While these figures only represent averages and individual outcomes are influenced by diverse factors such as personal health habits and genetic predispositions, they do offer some valuable insights. The typical financial landscape is undeniably prolonged and requires thoughtful consideration.

Longevity Risk and Retirement Savings Strategies

Mitigating the financial risks associated with retirement longevity requires a thoughtful and strategic approach. Some strategies we utilize include:

  • Diversification of investments to minimize exposure to market fluctuations. 
  • Including annuities in your retirement plan can offer a guaranteed income stream for life, acting as a shield against the risk of outliving one's savings. 
  • Regularly reviewing and adjusting the retirement plan ensures alignment with changing financial landscapes and personal circumstances. 
  • Long-term care insurance can be a prudent investment to cover potential healthcare expenses in later stages of life. 
  • Maintaining a healthy lifestyle and addressing preventive healthcare measures can positively impact longevity, influencing the overall financial trajectory of one's retirement journey. 

Partnering with experienced financial advisors, like those at Badii Group Private Wealth Management, can provide personalized guidance to tailor these strategies to individual needs, fostering a secure and resilient financial future in the face of retirement longevity.

Market Volatility: A Retirement Risk

Market volatility poses a significant risk to retirement portfolios as it can lead to unpredictable fluctuations in the value of investments. Sudden market downturns, economic uncertainties, and geopolitical events can impact retirement savings, potentially eroding wealth and diminishing the overall financial security of retirees. 

Managing this risk involves adopting diversified investment strategies, maintaining a long-term perspective, and regularly reviewing and adjusting the portfolio to align with changing market conditions and individual risk tolerance.

Investment Risk Management Strategies

At Badii Group Private Wealth Management, we believe in proactive investment risk management. When we create retirement plans with our clients, we are sure to use strategies that help mitigate the risk of market volatility in retirement. Some of those strategies include diversification, asset allocation, low-risk investments for retirees, and regular portfolio reviews. By adopting these practices, you can align your investments with your financial goals while minimizing exposure to market fluctuations. We'll explore investment options that prioritize capital preservation and income generation, offering stability and peace of mind during your retirement years.

Inflation: a Threat to a Secure Retirement

Inflation poses a substantial risk to retirement savings as it erodes the purchasing power of money over time. Retirees, particularly those on fixed incomes, may find their standard of living gradually diminishing if their expenses outpace the growth of their savings. 

How to Calculate for Inflation in Retirement

To mitigate the impact of inflation, retirees can consider investing in assets that historically outpace inflation, such as equities. Additionally, incorporating inflation-protected securities, like Treasury Inflation-Protected Securities (TIPS), into the investment portfolio can act as a safeguard, ensuring that the purchasing power of retirement income keeps pace with the rising cost of living. Regularly reviewing and adjusting the retirement plan to account for inflationary pressures is also a prudent strategy to maintain long-term financial stability. Badii Wealth Management takes all possible measures to protect their clients’ retirement plans from the effects of inflation. 

Unexpected Expenses

Unexpected expenses can pose a threat to retirement stability, catching retirees off guard and potentially derailing their financial plans. These unforeseen costs, such as medical emergencies or major home repairs, can deplete savings and disrupt the carefully crafted retirement budget. Mitigating this risk involves building an emergency fund during the pre-retirement years and maintaining a liquid portion of the portfolio to cover unexpected expenses without compromising long-term financial security. Regular financial assessments and contingency planning are essential to navigate and absorb unforeseen financial challenges in retirement. With Badii Wealth Management, we will be sure to plan for unexpected expenses and contingencies. 


What Is Retirement Risk Management?

Retirement risk management is the process of identifying, assessing, and implementing strategies to mitigate potential financial risks that may impact one's retirement savings and income

what is investment risk tolerance?

Investment risk tolerance is an individual's ability and willingness to endure fluctuations in the value of their investments, indicating the level of risk they are comfortable taking in pursuit of potential returns.

What is an appropriate amount of risk for retirement?

The appropriate amount of risk for retirement varies based on an individual's financial goals, time horizon, and risk tolerance, emphasizing the need for a personalized approach aligned with one's unique circumstances and preferences.

Retirement Risk Advisors

Navigating the complexities of retirement risk management can be challenging. Badii Group Private Wealth Management is here to guide you. Our team of experienced retirement risk advisors, including Kirk K. Badii, is dedicated to helping you make informed decisions about your financial future. Learn more about Kirk and our team here.

Retirement is a journey, and like any voyage, it requires careful planning and consideration of potential risks. Badii Group Private Wealth Management is committed to providing you with the expertise and support needed to navigate the seas of retirement with their inherent risks confidently. Contact us today to embark toward a secure and prosperous retirement journey.