Retirement can be a risky business if you don’t consider all the factors that can impact your retirement during your planning process.  Although it’s hard to know what will happen in the future to you or your investments, these are the main things that should be addressed in your retirement portfolio:

#1 Longevity. If boomers live into their 90’s and Gen X-ers live to a hundred, how long will you live? Medical science and healthier lifestyles will keep driving this number up. Depending on your retirement age, you will spend more time retired than you did working in the future.

Medical science has impacted retirement and will continue to influence how long people may live in an assisted living facility. If the cost of better quality facilities keeps increasing, what will they cost in 2040? For this reason alone, you can never have too much money for your retirement years. 

#2 Investment Horizon.  You have 30 to 40 years until you retire. One of your most significant risks is procrastination. Will you start saving when your children are older or out of college, or are your priorities the big primary residence and a vacation home? You can never get the lost years back, which is why retirement planning and saving should start early. Having the personal discipline to stick to a retirement savings plan will impact your retirement along with your time horizon. 

#3 Performance.  After you achieve critical asset mass, performance is your number one source of new assets. It may have 3-5 times the impact of savings. A crucial question is who produces the performance? Do you make your own investment decisions? Do you invest in a mutual fund family?  Having a financial plan in place and working with a financial professional regularly to monitor performance can significantly impact your retirement assets lasting throughout your life.

#4 Investment Risk. If you don’t take the risk when you are young, when should you? Investors in their 30’s and 40’s may be investing in the stock market. Yes, stocks are riskier than bonds, but stocks also outperform bonds over more extended periods, just not every year—the relationship between stocks, bonds, and money market performance bases on Capital Market Theory. You can afford to take a substantial risk if you have more time to recover from a bad year. However, it would be best if you were comfortable with the risk associated with your portfolio or adjustments need to be made.

#5 Investment Expense. There are no ‘free lunches’ when you invest your assets in the securities markets. And, every dollar of expense is one less dollar you have available for reinvestment and your future use. Watch your investments expenses as they could add up to thousands of dollars during your lifetime. 

Visit with your financial professional to discuss how these five retirement risk factors may impact you and develop a strategy for your retirement savings portfolio for your situation.

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.

Asset allocation does not ensure a profit or protect against a loss.

Past performance is no guarantee of future results.

Investing in stock includes numerous specific risks including: the fluctuation of dividend, loss of principal and potential illiquidity of the investment in a falling market.

Investing in mutual funds involves risk, including possible loss of principal. The funds value will fluctuate with market conditions and may not achieve its investment objective. Upon redemption, the value of fund shares may be worth more or less than their original cost.

Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.

All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

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