The unexpected risks you should prepare for in retirement

When it comes to planning your retirement, it is natural we focus on the risks that we’re most aware of. However, most future retirees or those already in the midst of their golden years are not prepared for the risks they haven’t thought about already.

Here are the risks that may not be at the top of your retirement planning but should still be on your radar.

Complacency risk

Perhaps your savings were depleted when you were younger and you have kept a relatively low budget ever since to make ends meet in your everyday life – or even decided to keep a tight budget when you were younger and haven’t raised it since.

Perhaps it seems your retirement account balances appear to be growing nicely so you never made sure if you were actually on the way to building a comfortable nest egg.

You have fallen for complacency risk. While you’re on the road to secure retirement, don’t lull yourself into a false sense of security. You may be short of your ideal savings for retirement and it is important to protect against the risk by giving yourself a retirement check up every 6-12 months.

Look for a retirement income calculator and write in your information including your income, the current value of your retirement accounts, how much you’re putting into savings each year and the age you plan to retire. This tool helps you calculate the probability of you achieving your goals.

Emotional risk

Marketing extremes and the impulse to buy are more likely to affect our investing decisions. This could mean we get too excited in the moments when stocks are on the rise or pessimistic when the market is falling short from your expectations. However, either way, letting your emotions take sway as your investing strategy can result in real damage to your finances and your retirement prospects. 

Perhaps to combat the risk of emotional investing, set up an asset allocation strategy so it will increase your chance of riding out stocks through their ups and downs without having an adverse reaction to them.

An asset allocation tool can help you come with an asset mix that suits you best – one that is risk-free.

Longevity risk

There is a possibility that perhaps you have underestimated how much longer you will live. This can result in an individual overspending during their retirement and being under-prepared when the unexpected comes to fruition. 

It is impossible to know when you’re going to reach the other side but being realistic with your spending and your retirement plan is crucial to a consistent lifestyle that doesn’t leave you looking for scraps near the end.

Seek a professional or use an Actuaries Longevity Illustrator that estimates how much you should be saving while you’re working, and how much you can safely afford to spend during retirement. Although this won’t eliminate the risk of longevity – it will equip you much better, so you know how to deal with it if or when the time comes.

How are you planning for retirement? 

This article was made in conjuction with Over60.