In the last post I discussed how to know if your retirement is funded or not. If you’ve determined that you have sufficient guaranteed income, or enough investments to fund your retirement without taking any market risk, then you’re in a really good spot. This is the situation many retirees used to be in back in the day.

Now that you’ve figured out your retirement personality, and I’ve totally depressed you with all the risks you may face, let’s figure out if you actually need to worry about how you’ll fund retirement.

If you feel like you’ve got a handle on lifespan, and you’re comfortable with investment risk - surprise! there’s another kind of risk you need to worry about. Our best-laid plans for budget and spending go awry when life happens. In retirement, this is even more impactful because surprises cannot be compensated for by working longer or earning more.

I think most people know they need to be concerned about investment returns during retirement. But do you know exactly what you should be worried about?

Similar to “average” life expectancy, “average” market return expectations mask the fact that returns are rarely average from year to year. Unlike life expectancy, you get another chance next year to be above average (sorry…a little financial planner humor there).

So here’s the deal. You might think that your biggest risk during retirement has to do with the financial markets. That is a risk, but we need to talk about life expectancy first.

What’s your approach to retirement income planning and why do you need one?

50 years ago, almost everyone had the same retirement income approach - work for a company for X number of years, retire and get a pension, and claim social security. (or I guess if I’m being accurate - most women had a husband who had this approach, but I digress)