How To Avoid Any Negative Impact On Your Retirement Investment

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Financial Risks Which Can Have a Negative Impact 

Over Your Retirement Nest Egg and Measures to Reduce Those Risks

If you are interested in building investments which will help you live a stress free retired life then it will be necessary to consult a certified financial planner. By consulting a financial planner you will be able to clearly understand common risks you will have to face and how to overcome them. So let us delve into the details in the following sections.

Financial Risks and Retirement Nest Egg

Employment Risk – Unforeseen Requirements Risk – Inflation Risk – Interest Rate Risk

There are several risks which can prove to be bottlenecks in your retirement investment planning, let us look at some of the important ones here.

Employment Risk

certified financial plannerIf you perform retirement income analysis by including supplemental income you will generate by doing a part time or full time job after retirement then it will be a great risk you will be taking.

The reason it is considered a risk is because of the fact that chances of getting a job after retirement will largely depend upon your health, family conditions and necessity to develop new skills. In addition to it, these factors may well reduce your chances of getting a job. As such, best thing to do will be do take into consideration the age by which you want to retire since it will help you have a clear idea of job prospects you will have after retirement and income you will require. 

Unforeseen Requirements Risk

Risk of unforeseen requirements can be in the form of:

  • Expenditure on health care for parents
  • Education fees of children
  • Change in marital status of a family member (such as a daughter)
  • Loss of employment

You may have to face these situations after retirement and financially assist your family members. As such, your certified financial planner will have to consider these situations and develop a financial plan which will assist you in meeting these unforeseen expenditures.

Inflation Risk

Value of money will not be same after 20 years as it is now and this creates inflation risk that it to be considered at the time of retirement planning. The main here should be to offset inflation risk so that you have enough money to meet your expenditures after retirement. Few of the things your certified financial planner should do in this respect would consist of:

  • Select equities for investment
  • Make an investment in assets such as a home
  • Choose annuities that provide cost of living adjustment

Interest Rate Risk

In case investments are made in products that have lower interest rate then in such situation growth of retirement savings will be slow, which in turn means that you will have less savings at the time of retirement. As for instance, in case there is a drop in bond's market value then interest rate will start rising and have a negative effect over your retirement income.

Summary

To summarize it can be said that you need to pay attention to retirement planning so that each and every aspect which can effect your retirement income is taken into consideration and necessary steps are taken to avoid likely problems.

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