Key investment risks upon retirement
With a change in investment focus comes a change in the types of risks to which you are exposed.
Upon retirement, the major risks you face include: market risk, inflation
risk, and longevity risk. A thoughtful approach will help you manage these
investment risks and meet your cash flow needs.
Market Risk
Once you’ve retired and started drawing money out of your portfolio, there’s usually less room for error than
when you were building your nest egg.
If the value of your portfolio declines significantly as a result of poor
markets, you’re not likely to have new assets – or the time – to make up
the loss. However, this doesn’t mean that you should automatically switch
your investing approach and abandon equities; doing that may
increase the risk that you won’t have sufficient assets to last through
your retirement.
Inflation Risk
As a retiree, you no longer receive regular salary increases to help offset the impact of inflation.
This means you must rely on your investment portfolio to cover any increase in your cost of living.
Fortunately, changes in your lifestyle upon retirement can result
in reduced spending, which in effect offsets rising prices.
But other costs – health
care, for instance – may increase.
As a result, it’s important to estimate your own "personal rate of inflation."
Longevity Risk
Longevity risk is simply the chance that you will outlive your
assets – a fear shared by many retirees,
but one that can be managed through planning.
Because people are living so much longer these days,
it's usually best to construct a plan that takes into account
a longer lifespan – one that
provides sufficient cash flow to maintain your retirement lifestyle,
and ensures that your cash flow is always there for you.
Whether it’s through one of our portfolio solutions,
a custom-tailored portfolio to meet your specific cash flow needs, or a Systematic Withdrawal Plan (SWP)
to provide you with automatic deposits, an RBC financial advisor can help craft the appropriate strategy for you.
Please stop by your nearest branch and ask us to review your
retirement income plan with you, or contact us at 1-866-365-2123.
RBC has a lineup of retirement cash flow solutions to
help you make your assets last so you can retire with confidence.
Important information about our financial planning services can be found at the bottom of our
homepage.
|
