You are exposed to five potentially catastrophic financial risks, unless you are lucky enough to be in the top 15% of wage earners who have substantial retirement savings. The top 15% are the chosen few who were lucky enough to work for the right companies or disciplined enough to begin saving for retirement at a fairly young age.
The risks that are described in this article have the greatest impact on Americans who are 55 and older. The statistical data is based on surveys that were conducted in the first quarter of 2015.
#1 - Inadequate Savings
64.7% of Americans say they do not have adequate retirement savings that will produce comfortable, secure lifestyles for the rest of their lives.
Did you save enough inside and outside qualified retirement plans to fund a comfortable, secure retirement? There are two solutions: defer your retirement dates or reduce your standard of living during your retirement years. There is no good news for this situation.
#2 - Risky Security Markets
Your biggest financial risk is retiring at the end of a material down year - 2008 was down 45%.
You plan to withdraw 5% of your assets each year to help fund your retirement - after social security and distributions from pension plans. Unfortunately, you have to invade principal when bonds are yielding 3% or less - and this is before investment expenses and inflation are deducted. This scenario will force you to invade your principal, which increases your risk of running out of money late in life.
#3 - Catastrophic Incident
$4,000 per month for assisted living may increase to $10,000 per month in your lifetime. How do you prepare for this extraordinary increase?
A debilitating illness (stroke, Alzheimer's) can destroy almost any retirement plan. You could lose a source of future savings. Your out-of-pocket medical expenses could skyrocket. Meanwhile, your spouse still needs money to live.
#4 - Running Out of Money
Running out of money late in life is a very real concern for 100 million Americans. There is no easy solution except keep working.
The #1 concern of the investors who responded to our survey was running out of money late in life. For some seniors, that could be 20 or 30 years from now. That is a lot of anxiety for a long period of time. The best rule: You can never have too much money.
#5 - Bad Financial Advice
The scariest statistic of all is that 79% of investors who say they do not know if they selected competent, ethical financial advisers.
Your odds of a successful retirement experience go way up if you have a top quality financial adviser. The odds go way down if you select an incompetent or unethical adviser. It is very scary when your financial security may be influenced or controlled by people who put their interests ahead of yours.
Originally posted on Paladin Registry.
About the Author: Jack Waymire has worked in the financial services industry for 28 years. For 21 years he was the president and chief investment officer of a registered investment advisory firm with more than 50,000 clients. He left the industry in 2003 when his book (Who's Watching Your Money?) was published by John Wiley. That same year he launched an investor information website (www.PaladinRegistry.com) that was based on the principles in his book. Jack is a columnist for Worth magazine, a frequent blogger on major financial sites, and widely quoted in the media including the Wall Street Journal, Forbes, BusinessWeek, Bloomberg, and Kiplinger. Visit www.PaladinRegistry.com. Follow Jack on Twitter @PaladinRegistry