Merriam-Webster defines risk as the possibility that something bad or unpleasant (such as an injury or a loss) will happen. The question I often ask when having conversations about retirement is “How you are going to live 25 or 30 years without a paycheck?”
When people retire, their needs turn from putting money away to prudently taking money out. Time in retirement is often misunderstood. People are living longer and inflation and taxes are reality.
The average age of retirements is 62…and rising. The joint life expectancy of a 62-year-old non-smoking person (or couple) is age 92…and rising.
The planning dialogue should address how to generate stable income, manage retirement spending, protect your family and possibly leave a legacy.
The critical financial issue in a three-decade retirement is maintaining purchasing power, simply defied as a dollar income that rises through time at roughly the same rate that the retirees’ dollar cost of living goes up. The risk, to me is running out of money, not the zig and zags of different market cycles.