Dealing with the Unpredictable in Retirement

Today’s Wisdom:

Are you prepared to handle those unforeseen circumstances when they arise in retirement? Dealing with unpredictability is something you need to be ready for so let’s talk about four areas that are difficult to forecast. We’ll also spend some time talking about the importance of managing unnecessary risk within your retirement plan.

Want to save time? Click the timestamps below to jump ahead to specific spots in the episode.

What You’ll Learn:

Trying to predict things like taxes and interest rates are impossible, but that doesn’t excuse you from having to prepare for them.

During this episode of Money Wisdom, we’ll be taking a look at four different variables that will affect our retirement and discuss the way to be ready to deal with the unpredictability. Let’s also take a look at unnecessary risk, which is a quick way to damage your portfolio. Too many of us take on more risk than we need and we want to help you see why that’s a big problem.

Here’s a look at what we discussed with timestamps that you can click to take you to specific conversations in the show.

 

Uncertainty in Retirement

Wouldn’t it be great if we knew how life would play out and could plan around that? While that would be a lot easier, it would also take all the fun out of planning. Being able to deal with the unpredictability of life and finances is an important trait to have in retirement.

There are four specific areas of unpredictability that we want to cover on this episode: lifespan, interest rates, tax rates, and the stock market. The good news is that we know each is impossible to forecast so let’s understand the ways we can position ourselves in the best way to handle the good and the bad.

[1:54] – Let’s talk unpredictably in retirement.

[2:17] – We don’t know how long we’re going to live. How do you plan for it?

[4:07] – Changes in interest rates aren’t predictable so how do we handle that?

[6:40] – What about future tax rates? We can expect them to go up but when and how much?

[7:15] – The most unpredictable is the stock market.

 

Managing Unnecessary Risk

One thing that we can take control over is the amount of risk we carry in our portfolio. Everyone has a different tolerance for risk, but those levels will also change depending on where you are on your retirement journey. As you begin retirement, risk management becomes much more important but you also have to continue generating income to outpace inflation. It’s a difficult balancing act but that’s where an advisor can be your biggest ally.

Joel will explain why people take so many unnecessary risks – sometimes it isn’t your fault – and what we can do to reduce risk without reducing growth.

[8:38] – Let’s turn the conversation to risks people take with their money. Why do so many people take unnecessary risks?

[9:08] – People managing their own money often don’t know any better.  

[10:04] – People working with an advisor take risks for two reasons.

[12:02] – How do we reduce risk without reducing our opportunities to grow our money?

[14:40] – So how can we know we’re taking the appropriate amount of risk?

 

Mailbag

We take one listener question today from Emmett, who is worried about the ups and downs of the market in retirement. How does someone rest easy when the market has a bad day? The truth is, retirees shouldn’t be worrying about the volatility because your plan should be built to limit your risk. That’s something our Money Map can help you lay out. Joel explains this a little deeper on the show.

[16:04] – Listener Question: I’m retiring in a year and I’m having trouble sleeping every time the market is having a bad day. How do people live like this everyday in retirement?

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Final Thoughts:

“Interest rates have moved up quite nicely. I think we’re going to get into a time period where we reward savers finally again in this country instead of just people who want to borrow.”  

– Joel Johnson, Money Wisdom Podcast

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