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Value Creation Blog

6 Common Risks That Can Ruin Your Retirement

Posted by Josh Patrick

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A large part of the work we do at Stage 2 is helping our clients manage risk. In the investment part of our business that would mean investment management.

That’s not the only type of risk we help you manage. I think a more important risk is what I’m starting to call retirement risk. These are risks besides investment risk that we should be helping you think about.

Here are 6 things for you to consider.

Let’s start with health.

I think this is the biggest risk that you’re going to face while you’re alive. Almost all other risks can be managed as long as you have your health. If you lose that, then it’s going to be very difficult for you to face other problems that might appear.

Managing health risk falls into two categories. The first is the risk that you fall ill or come down with a catastrophic disease. This type of risk will force you to learn about our broken health care system.

The second type of risk is a bigger problem. That’s the risk that you don’t see because it happens slowly. That’s the risk of having a poor lifestyle that eventually catches up with you.

If you don’t eat well, you won’t notice it first. The same is true with exercise. Even using your brain is a health risk that we too often ignore. Ignoring these three issues can eventually cause you real problems. When you think about health risk don’t forget to think about lifestyle issues.

You could be facing retirement risk from your children.

I doubt your children will consciously make your life miserable. It can happen and before you know it, your life in retirement can be put in jeopardy.

If a child has a drug problem, you’ll want to help them in any way you can. You might even spend money that you’ve planned to use in retirement. If this happens, you’ll need to make adjustments in your plans and the sooner you work on this the safer your retirement will be.

If your children are costing you money as adults, make sure you take a look at retirement plans you have made. Those plans might need to be adjusted. Is this something you’re willing to do?

What are you doing to help your parents move through their life?

The Baby Boomers are the first generation where we have become a sandwich generation. On one hand, many of us are having children later in life and that is causing us to delay retirement.

The second challenge comes from our parents. With life extension technologies that exist we’re living longer with more chronic diseases. This means that many of our parents are living well into their 80’s and even 90’s.

As our parents live longer there are cognitive issues that appear. Our parents are just not as sharp as they were ten or twenty years ago.

It’s easy for unethical people to pray on your parents. If that happens, you might find yourself having to use financial resources you had planned to use in retirement. Don’t you think it would be better for you to put safeguards in place so this doesn’t happen?

In retirement there can be a risk of your world getting smaller.

Let’s talk for a few minutes about your life. If you’re in retirement there’s a good chance your world will start to get smaller. By smaller I mean you could find that your social circle shrinks and the number of people you socialize with falls.

One of the things that leads to a great late life is having an interesting social circle. This won’t happen automatically. You’re going to have to pay attention and make sure that you replace friends and acquaintances you lose.

I know that as I age I have to work hard to keep my social circle robust. It’s just not as easy as it was when I was twenty to find new friends and acquaintances.

Retiree’s remorse is another risk worth thinking about.

Losing friends does not mean they die. What I’m talking about is the fact that those you had a life with while you were working fall off your radar screen.

Losing social relationships we had at work is what I believe causes retirement remorse. This is where you’ve retired and after you leave work you wish you never left. This happens more than you probably realize and it’s something I don’t want to happen to you.

Then of course there’s the risk that you can run out of money before you run out of life.

All of these issues can cost you money that you didn’t expect you would have to spend. If any of them happens after you retire, you might find yourself in a position of having to go back to work…..and the job you find could be one that you don’t love.

This is where scenario planning comes into play. I hope that you’ve gotten a financial plan done. I’m also hoping that part of that financial plan has been stress tested with the sort of issues that we talked about above.

For many scenario or stress testing seems like a waste of time till it isn’t. If you do a stress test and any of the issues above come to be true, you’ll have at least thought about how you’ll handle them. Isn’t that something that could be worth while.

I know that I would never run a business without doing stress tests….Doesn’t that seem to make sense in your personal life as well?

Why don’t you click here and let me know what you think.

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Topics: retirement planning, financial planning, scenario planning

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