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The Risks to Retirement Have Changed

Posted by Barrett Costello  February 26, 2014 07:33 AM

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The good news is that Americans on average are living longer than ever. The bad news is that Americans on average are living longer. Running out of assets before running out time is one of the biggest fears Americans have in retirement. Consider designing a retirement income plan that takes into consideration social security benefits, pension benefits and personal savings with the income you’ll need to stretch your income for as long as you live.

Interest Rates

Interest rates have been historically low since the financial crisis in 2008. Savers who used to live off of the interest on their bank CDs have not been able to do so. However, many American retirees have benefited from the lower rates if they invested in bond fund funds. 2013 proved to be a wakeup call for bond fund investors as the Federal Reserve signaled that interest rates are likely to gradually return to their historic norms. That means that the interest paid on your bank CD and savings account will see a boost in the interest earned. However, millions of Americans invested in bond funds are at risk for a loss in principal as interest rates continue to rise. Some options to consider may be floating rate bond funds and convertible securities funds.


Inflation has been lower in recent years compared to the historical longer trend. However, one area that inflation has been and continues to be higher for retirees and all Americans is health care. It remains to be seen the impact of the Affordable Healthcare Act (aka Obamacare) has on health care inflation but, the fact remains that Americans on average spend more on healthcare as a percentage of their income in retirement than before. Having diversified sources for your income as well as having a diversified portfolio of investments to offset potential inflation is strategies all retirees should consider.

Long Term Care

No one likes to talk about Long Term Care risk. No one wants to picture themselves having to need help and being elderly. As noted above, Americans are living longer than ever. If you live longer, you will slow down and need help with day to day activities. If you need help, it will cost money. You will be taken care of if you are disabled in old age, but, the question is how much control you have over who takes care of you. Long Term Care Insurance is one way to pay for that care when it is needed. However, by the time most Americans start to think about the need for Long Term Care Insurance it is usually too late because the cost can be too high for the average retiree. The best time to consider Long Term Care Insurance is in your fifties. You are healthier and the premiums are much lower compared to when you reach your mid-sixties.

The Bottom Line

All of these risks are addressed as part of a comprehensive financial plan. The best approach is to work with a Certified Financial Planner® professional who will provide a customized plan to help you understand the risks and provide a roadmap for a successful retirement.

To find a CFP® professional go to Financial Planning Association of MA webpage:

John F. McAvoy, CFP®, AIF® is a member of the Board of Directors for the FPA of MA and is the principal at Waterstone Retirement Services in Canton, MA
Securities offered through Investors Capital Corp. 6 Kimball Lane, Lynnfield, MA 01940 Member FINRA, SIPC

This blog is not written or edited by or the Boston Globe.
The author is solely responsible for the content.

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Local finance professionals share insights and advice on issues such as budgeting, managing debt, and retirement planning.

About the contributors

D. Abraham Ringer is a CERTIFIED FINANCIAL PLANNER practitioner and a Financial Adviser with Morgan Stanley Global Wealth Management in Boston. He is registered in MA, NH, NY and several other states to which his articles are directed. For more information please visit
Financial Planning Association™ of Massachusetts has 900 members who specialize in the financial planning process. Many of its members engage in philanthropic pro bono work in their communities, recommend legislation, elevate public awareness, promote financial literacy, and advocate for sound economic and tax policies.
Odysseas Papadimitriou is the founder of, a credit card and gift card marketplace, and, a personal finance site. He has more than 13 years of experience in the personal finance industry, and previously served as senior director at Capital One.

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