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Prepare for financial risks in retirement
As you near retirement, it may be a good time to start thinking about how to best manage your portfolio so you can live on what you've saved. One of the most important things to consider is how to manage retirement risks.
Here are three financial risks you may face in retirement
1. The risk of outliving your money. There’s a 50% chance that you will live to age 89 and a 44% chance that, if you’re married, you or your spouse or partner will live to age 95. 1 In addition to regular expenses, you should factor in:
- Supporting family members: Your parents may need your help supporting and/or funding their day-to-day living. You may also find yourself helping adult children and grandchildren with living, medical and college expenses.
- Healthcare: As you age, healthcare spending will likely take up more of your budget. Over 15% of annual spending for those aged 75 and over goes towards healthcare expenses, compared with 12% for those age 65-74. 2
2. Inflation risk. Food, medical care, transportation and recreation are likely to cost considerably more 20 years from now than they do today.
3. Market volatility risk. Market fluctuations may not be a big concern while you’re still working. But when you’re retired, you have less time to recoup losses from market drops. If you retire during a “down” market, your portfolio might suffer a hit and not recover, giving you less money to live on for the rest of your life.
Ways to help manage risk
Everyone’s needs are unique – there’s no “one size fits all” solution when it comes to managing risk. You may want to consider:
- Putting a portion of your portfolio into investments like annuities that offer guaranteed income you can’t outlive. 3
- Keeping a portion of your portfolio in more growth-oriented investments, like stocks, to help offset the risk of inflation. Keep in mind that doing so could expose you to market risk, and you could lose money.
Speak with a TIAA advisor
A TIAA advisor can help by getting to know you and your situation – and then reviewing your options with you so you can make informed decisions.
You can also visit Preparing for Retirement to see what your retirement could look like—and how much income you may need. Just log in to TIAA, answer a few questions and get a Retirement Profile to help you plan for the retirement you want.
1 TIAA Mortality Tables 2017.
2 BLS, Beyond the Numbers, March 2016. https://www.bls.gov/opub/btn/volume-5/spending-patterns-of-older-americans.htm
3 Fixed annuities offer guaranteed income subject to the claims paying ability of the issuing insurance company. If you make a withdrawal from an annuity prior to age 59½, you may be subject to a 10% penalty on earnings in addition to ordinary income.
This material is for informational or educational purposes only and does not constitute a recommendation or investment advice in connection with a distribution, transfer or rollover, a purchase or sale of securities or other investment property, or the management of securities or other investments, including the development of an investment strategy or retention of an investment manager or advisor. This material does not take into account any specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions should be made in consultation with an investor’s personal advisor based on the investor’s own objectives and circumstances.