Decoding the R's: Understanding Income Risk in Retirement

Retirement: More Than Just a Number

Reaching your savings goal is a major milestone, but retirement stability isn't just about the size of your nest egg—it's about the security of your income stream. Once you stop earning a salary, you introduce several unique financial risks that can chip away at your quality of life. We call these the "R's" of Income Risk.

The Four Major Risks to Your Retirement Income

A secure financial strategy must actively plan against these four primary threats:

1. Rate of Return Risk (Market Risk)

This is the most talked-about risk. It refers to the danger that poor market performance in the early years of your retirement will force you to withdraw more from your principal, drastically reducing your portfolio's ability to recover later.

• Mitigation: A well-designed Income Bucket Strategy where immediate funds are held in low-risk, stable assets, shielding them from market volatility.
• Mitigation: Strategic diversification outside of traditional stocks and bonds.

2. Inflation Risk

The purchasing power of your money decreases over time. A dollar today will buy less in ten years. This is especially dangerous for retirees on a fixed income.

• Example: If inflation is 3% annually, your $50,000 fixed income will only feel like $41,874 of purchasing power after five years.
• Mitigation: Incorporate assets that have historically outpaced inflation (e.g., real estate, commodities, certain types of annuities).

"Inflation is the silent threat to retirement. Your plan must be designed not just to maintain capital, but to actively grow your income faster than prices are rising."

3. Longevity Risk (The Risk of Living Too Long)

This is the risk that you or your spouse outlive your savings. With people living longer than ever before, retirement planning needs to account for 25 to 35 years without an earned income.

• Mitigation: Maximize the highest possible Social Security benefit by delaying claims until full retirement age or later.
• Mitigation: Explore guaranteed income solutions like annuities to cover essential living expenses for life.

4. Withdrawal Rate Risk

This risk stems from taking too much money out of your portfolio too quickly. The popular "4% Rule" is a starting point, but it isn't a guaranteed safety net.

• Danger: High early withdrawals significantly increase the likelihood of running out of money.
• Our Approach: We use personalized modeling based on your spending habits, essential versus discretionary costs, and asset mix to determine a safe, flexible withdrawal strategy.

The Becker Retirement Difference: Personalized Solutions

We don't offer generic templates. Our one-on-one guidance focuses on integrating all four risks into a single, comprehensive plan. Your retirement journey deserves a strategy built for stability, resilience, and confidence.