First Person: Our Biggest Retirement Risks

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A recent article on MSN Money laid out some of the more major risk factors that can come into play during retirement. It had me thinking about some of the risks that come into our own retirement planning and how I am trying to compensate for or reduce the severity of these risk areas.

While there's almost always bound to be some risk in our retirement planning no matter what I do, this doesn't mean that I can't work to cut as much of that risk out of the equation as possible. Therefore, the following are our greatest risk areas and what I'm trying to do to prepare for them in advance of our retirement.


I've been gauging my personal expenses for years, and this helps me in more ways than just seeing where my money goes. Such tracking also makes it possible to gauge our personal inflation rate year-or-year for multiple years.

In the past, this rate has ranged right around 3 percent. However, lately it has jumped significantly. With the federal government quoting an inflation rate right around 2 percent, our personal inflation rate is closer to 5 percent. With things like health insurance and taxes climbing quickly, it's pushing our personal inflation rate higher at a much faster rate than the government is quoting, and this could prove dangerous when it comes to retirement.

In essence, this is telling me that I need to find investment vehicles that are returning at or above a 5 percent rate just to keep pace with inflation, and with interest rates low on things like certificates of deposit and savings, and the constant ups and downs in the stock market, this can make it difficult to consistently match these personal inflation rates if they continue to stay high.

Health Care

As I mentioned, one area that has had a huge affect on our personal inflation rate is the cost increases we've recently seen in our health insurance. Most recently, costs shot up by nearly 25 percent year-over-year. This is a troubling aspect of our family expenses, as health insurance costs comprise almost a quarter of our total family spending. Should increases continue at rates even close to what we've seen recently, I can't see retirement ever being a possibility. In fact, I see bankruptcy being the more likely route.


Both my wife and I have a history of longevity in our family. Her grandmother on her father's side lived to be 95 years old. My grandfather on my mother's side lived into his 90s, and his mother did the same. Therefore, while we look at this as a positive in one way, when it comes to retirement planning, it can also be a financial risk.

While it's by no means a guarantee, should we end up living into our late-80s or even 90s, we could find ourselves outliving our retirement savings. Therefore, this is an aspect that we have to incorporate in our retirement planning. This means that we'll either have to save more, work longer, or some combination thereof. Personally, I'm fine with working longer as long as I'm able, since I enjoy my work and like to stay active. Therefore, at least at this point, this is my plan to help counteract the possible financial risk involved with living longer.

Where We Feel Comfortable

But it's not all doom and gloom when it comes to our retirement risks. There are certain areas in which we area somewhat confident when it comes to our retirement and retirement planning.

Since both my wife and I earn an income, the death of a spouse aspect of retirement planning -- and the life insurance possibly necessary to balance such a risk -- is not something we're considering a big risk to retirement. We are also comfortable with our investment risk, which while maybe not earning us as much in investment returns due to our lower risk level, is at least maintaining our investment account levels securely. And finally, the MSN Money article mentions gender as a possible risk to retirement due to the possibility of women earning less money. This however isn't an issue in our situation since my wife has the better and more stable of the two family incomes. Therefore, we're satisfied that these risks are not as prevalent in our retirement situation and will continue to focus on other issues before these.

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