It’s never too early to start saving and planning for retirement. People getting ready to retire should do a risk assessment first, according to Shirley Flick, a Certified Financial Planner. Her office is located at 1618 Main St., Great Bend.
“Several types of risks should be addressed so that your retirement years do not end in financial disaster,” Flick said, providing the following information. “I hope this assessment is read during your morning coffee, talked about over a meal or with your family either before you retire or even after retirement.”
Longevity Risk — The risk that someone will outlive their wealth and available income. People today are living much longer than they did even 20 years ago with all of today’s health advantages. Longevity risk can be one of the most damaging since approximately 50 percent of people between the ages of 50 to 65 have only saved $50,000 toward retirement.
Question: Do you know how much it will take to replace your current income for the next 20 to 30 years?
Excess Withdrawal Risk — The risk that an individual will draw down assets too quickly and undermine their retirement plan. Excess withdrawal risk can be managed by preparing a well developed plan that includes disciplined savings, sound budgeting and a clear understanding of your expenses and available sources of income. If you have not saved enough for retirement then you may have to continue working for a few more years or, if retired, you may have to work part-time to increase your monthly income.
Entitlement Risk — The risk that government programs such as Social Security or Medicare will not offer sufficient protection for retirement.  Entitlement risk can be managed by increasing your personal saving and investing in your employer’s retirement plan or an individual IRA. Calculate all of your Social Security payout benefit options before you start taking them at an early age so that you understand the effects on your taxes, on your survivor benefits, and how this will affect your spouse’s benefit as well. An investment professional can calculate all the different scenarios in helping you determine when is the best time to start taking your Social Security.
Asset Allocation Risk — The risk of investing either too conservatively or too aggressively and not adequately diversifying assets to sustain a portfolio across markets cycles ups or downs. Asset allocation risk can be managed through the assistance of experienced investment professional that match your goals, your risk tolerance, and time horizons. Your asset allocation needs to be reviewed at least once a year.
Inflation Risk — The risk that rising costs will undermine purchasing power over time. Inflation risk can be managed through portfolio diversification and proper financial planning. Many things can and do change over a period of 20 to 30 years. I can still remember when a gallon of gas was 25 cents, and 20 years ago you could walk out of the grocery store carrying a whole week’s worth of groceries for a family of four for about $30, which will buy one bag of groceries today.
 Medical Expense Risk — The risk of paying for the growing cost of health care related services in retirement. The estimated out of pocket costs for health expenses for a retiree today age 65 for over the next 20 years will be over $200,000. This does NOT include long-term care expenses. Medical expense risk can be managed in a few ways, such as funding a Health Saving account, owning long-term care insurance or the new hybrid life insurance with a long-term care rider or other asset-based products that help toward paying these expenses.
Tax Risk — The risk that rising taxes or unforeseen tax consequences can have on a portfolio or on purchasing power. Tax risk can be managed using tax-deferred accounts and tax efficient investments, and by seeking guidance from a tax professional before decisions are acted upon. Asking for advice regarding the tax outcome could save you money in the certain instants.
Personal Risk — I like to call this one, “Life Happens Risk.” The risk that an unexpected change in your family – such as divorce, death, adult children returning home or having to raise your grandchildren – may undermine anticipated retirement plans. Personal or event risk can be managed through preparation of a financial plan, by establishing an emergency fund, owning the adequate amount of life insurance, and annually updating and reviewing your beneficiaries on all of your accounts including all retirement accounts.
Incapacity Risk — The risk that as a result of deteriorating health, a retiree may not be able to execute sound judgment in managing their financial affairs. Incapacity risk can be managed through having the proper tools in place — such as a will, a trust, and power of attorney provisions. They should be in place at the time of retirement, if not way before.
For more information, Shirley Flick may be reached by calling her office, (620) 793-9999, or the toll-free number, (866) 262-3601.