Risk Assessment

When planning retirement finances it is important to consider some of the risks involved with that.  Common mistakes that people make are starting too late to plan, not considering the finances that will be needed in order to do the hobbies, traveling, etc, and not planning on a long life. A wise planner will consider things like inflation and time.

For example, you start with a need of $50,000 a year, increase that need by a meager 3% inflation increase and you will see that when you retire in 20 years you will actually “need” $90,000 a year to live. Then consider that you live for 20 more years once you are retired, that need will still increase due to inflation and you are looking at $160,000. Now, your needs may change over the years. You may start out spending more while you are active. As the activity level decreases, the needs will change. These are all things to consider when planning for the future.