Financial planners have identified eight prime retirement income risks for those who've left the workforce and offers some guidance for reducing those risks.
Generating enough income in retirement calls for managing risks to that flow of cash. Retirement savers can't do that unless they know what those risks are. Financial planners identify these eight prime retirement income risks and provide guidance for reducing them.Dallas-based certified financial planner Scott Stratton offers this scenario: The market plummets 30 percent the year that you retire and you start withdrawing 4 percent annually from what was previously a $1 million portfolio.
One remedy suggested by Fort Worth, Texas, CFP Tim Estes, is to have a robust cash emergency fund to tide you over without tapping retirement accounts."If your expenses are $60,000 a year and you have $60,000 in a money market, who cares if the market goes down?" said Estes, founder and CEO of Estes Financial."Because it does come back.""This is a huge risk, as retirement is becoming longer," Stratton said.
To mitigate this risk, MacKenzie suggests delaying claiming Social Security benefits until the maximum benefit is reached at age 70."The longer you expect to live, the longer you should delay Social Security," she said.Although rates are rising, current fixed-income returns lag well behind historical norms. This provides a potent challenge to people seeking retirement income. Estes suggests high-dividend stocks as alternatives to puny bond yields.
Currently the safe percentage can vary, depending on whether a retiree expects other income from pension or annuities, MacKenzie says. Financial planning software uses simulations to produce more reliable figures in complex situations."We put all their assets and income expectation in there and show them with their existing strategy how long their money will last," she said.
Other retirement risks may also crop up. Estes sees future tax rates as a potential threat to savers with well-stocked individual retirement accounts and other tax-deferred accounts."Right now, taxes are at the lowest rates we've had in decades," he said.— By Mark Henricks, special to CNBC.com
United States Latest News, United States Headlines
Similar News:You can also read news stories similar to this one that we have collected from other news sources.
The risks of military intervention in VenezuelaUsing force to oust Nicolás Maduro would be horribly risky
Read more »
Trump whipped up public emotion over Otto Warmbier’s death. Now it’s boomeranging back on him.Having once relied on the Warmbier family to bestow moral authority on his risky North Korea strategy, Trump has lost a crucial partnership at the worst time.
Read more »
Bangladesh to relocate Rohingya to remote isletMore than 103,000 Rohingya out of over a million who fled Myanmar will be moved to Bhashan Char but international groups warn that the move could be risky.
Read more »
Spain’s centrist party is struggling to stay that wayAlbert Rivera's bet on forming a centre-right government with the PP and Vox is a risky one
Read more »
Oil Has Best Start to a Year Ever as OPEC Production FallsOil prices are off to their best-ever start to a year as fears of a supply glut cool, part of a 2019 recovery in risky investments from stocks to commodities.
Read more »
Analysis | Democratic candidates are backing reparations for African Americans. That could be politically risky.Analysis: Democratic candidates are backing reparations for African Americans. That could be politically risky, Eugene_Scott writes
Read more »
Financier Who Amassed Insurance Firms Diverted $2 Billion Into His Private EmpireThe sheer scale of Greg Lindberg’s use of insurance assets to invest in his own businesses has little precedent in recent decades, industry experts say, and exposes hundreds of thousands of policyholders to a potentially risky strategy. He is under investigation by the FBI and state authorities.
Read more »
7 Common Retirement/Tax Mistakes and How to Avoid Them7 common retirement/tax mistakes and how to avoid them paid Impact_Partners
Read more »