Volatility Doesn’t Have to Spell Retirement Planning Trouble
Inflation, rising rates and market gyrations can actually make this a good time to clarify your vision for the future and ensure your portfolio matches those goals and protects against risk.
The past year has given investors plenty of reasons to worry about their retirement savings. While fear is an understandable response to the perfect storm of inflation, rising interest rates, bank failures and market volatility, current economic conditions also provide an opportunity for people to step back and ensure they are well-positioned for the future.
Retirement planning is more complex than most people realize, which is why long-term preparation is critical. Yet many people I talk to spend weeks planning vacations but don’t spend more than an hour or two each month thinking about retirement — if they think about it at all.
When the economic environment is constantly shifting, it’s easy for investors to make reactive decisions based on daily ups and downs. However, these short-term decisions can have long-lasting effects that work against a person’s overall financial goals.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
F&G’s third annual Risk Tolerance Tracker, which surveyed nearly 1,700 American investors, found that 73% are worried about their retirement income compared to the past two years — 61% in 2021 and 60% in 2020. Of the top concerns, 79% of respondents are worried about inflation impacting their retirement, a sentiment that has continued to increase since 2021, when 73% of respondents said the same.
So, what are investors doing? Nearly half (48%) say they are taking action and actively adjusting their retirement plans. This is good news. A solid, well-thought-out plan makes it easier to put emotion aside. But before making any changes, people should first reassess what retirement means to them.
What Does Retirement Look Like for Me?
One of the first questions financial advisers tend to be asked is, “How much do I need to save for retirement?” It’s a question that is impossible to answer without a deep dive into a person’s lifestyle and vision for the future. For example, does the person need to support adult children or elderly parents? How long do people in their family tend to live? Do they have health issues? Is it important for them to leave money for the next generation, or do they plan to spend most or all of what they have?
All of these things will have a large impact on a person’s “retirement number.”
Does My Portfolio Match My Goals?
Once a person has a vision of what retirement will look like, they should evaluate their portfolio — ideally with a financial adviser — to ensure they have the right products to help them get there. Some may be leaving themselves exposed by taking on too much risk, while others may not be taking enough risk to generate the returns they need.
Often, people say one thing about their risk tolerance and do another. Our survey found that 78% of American investors say they have become more financially risk averse — up from 69% in 2021. Despite this, many investors are relying on volatile investment vehicles such as stocks (41%), with some branching into riskier assets like cryptocurrency (20%).
As people get closer to retirement, their risk tolerance understandably declines. At that stage of life, the risk of a big loss isn’t worth a few extra percentage points of return. Where life insurance can provide peace of mind by ensuring that one’s family is taken care of, eliminating the need for a retiree to worry about if they are spending too much of their children’s inheritance, insurance products like annuities can reduce the level of risk within a retirement portfolio.
Many annuities are protected from market downturns, serve as a hedge against inflation and can come with a duration that matches one’s life expectancy, reducing longevity risk. Annuities can provide a different sort of guarantee — a stream of guaranteed income. As with life insurance, annuities can remove anxiety over spending, as people know they will be getting a check every month for as long as they live.
Despite the benefits these types of products can provide, only 14% of Americans report owning one, underscoring how many investors are not taking advantage of the full range of options available to address these types of inflation or longevity concerns.
How Do I Create a Holistic Plan?
Of course, creating a personalized portfolio is easier said than done. As investors look at products to purchase, they must analyze the pros and cons of each one, as well as how they work together in a diversified plan.
As mentioned, insured products can help create a more holistic plan alongside traditional investments, and speaking with a financial adviser can help simplify the process. While 45% of American investors say they are willing to explore new financial products, a majority (58%) are not leveraging the skills of an adviser to create a strong portfolio.
By clarifying their vision for the future, exploring an expanded universe of financial products and connecting with an adviser, investors can ensure their portfolios are built to optimize opportunities and protect their downside risk. While the current financial environment can be scary, stepping back from the day-to-day to plan for the long term can help people stay focused on the big picture and sleep better at night.
To continue reading this article
please register for free
This is different from signing in to your print subscription
Why am I seeing this? Find out more here
For more than 30 years, Chris Blunt has held senior leadership positions at several major insurance and financial services companies. He joined F&G in 2019 and currently serves as the Chief Executive Officer. Prior to that, he served as Chief Executive Officer at Blackstone Insurance Solutions and spent nearly 13 years at New York Life in a variety of executive roles.
-
Is a Phased Retirement Right for You?
Want to keep working, just not as hard? A phased retirement may just be the answer.
By Kimberly Lankford Published
-
Four Tips to Make Your Sales Presentation a Winner
Being prepared and not being boring can go a long way toward persuading a potential customer to buy into what you’re offering.
By H. Dennis Beaver, Esq. Published
-
Four Tips to Make Your Sales Presentation a Winner
Being prepared and not being boring can go a long way toward persuading a potential customer to buy into what you’re offering.
By H. Dennis Beaver, Esq. Published
-
Pros and Cons of Waiting Until 70 to Claim Social Security
Waiting until 70 to file for Social Security benefits comes with a higher check, but there could be financial consequences to consider for you and your family.
By Patrick M. Simasko, J.D. Published
-
Now Could Be Time for Private Investors to Make Their Mark
The venture capital crunch may be easing, but it isn't over yet. That means there could be direct investment opportunities for private deal investors.
By Thomas Ruggie, ChFC®, CFP® Published
-
How to Stop Boredom From Ruining Your Happy Retirement
Retirees who explore new interests and have an active social life are more likely to find joy — and even greatness — in the newfound freedom of retirement.
By Richard P. Himmer, PhD Published
-
The Life-or-Death Answers We Owe Our Loved Ones
How our life ends isn’t always up to us, but that question too often must be answered by loved ones and health care workers who don’t know what we would want.
By Joel Theisen, RN Published
-
Hot Tips for Home Buyers and Sellers Right Now
Real estate looks to be especially hopping this spring, thanks to pent-up demand and buyers adjusting to higher mortgage rates. Here’s how you can prepare.
By Pam Krueger Published
-
Is 100 the New 70?
Eating well, exercising, getting plenty of sleep and managing chronic stress can help make you a SuperAger. Funding that long life requires longevity literacy.
By Phil Wright, Certified Fund Specialist Published
-
Nine Lessons to Be Learned From the Hilton Family Trust Contest
Disclaimers, good communication, post-marital agreements and more could help avoid conflict in a family after the owners of a wealthy estate pass away.
By John M. Goralka Published