retirement risks

What are the retirement risks you should watch out for when planning your future?

The following risks, which often get forgotten, can torpedo even the best-laid retirement plans:

Underestimating the true cost of retirement

Many people plan for rising healthcare expenses as they get older, but they don’t factor in the increasing costs of living longer. Other unforeseen retirement costs include:

* Caring for aging parents,

* Financial support for children,

* Increasing health insurance premiums,

* Prescription costs not covered by insurance.

Your best planning move is to anticipate the unexpected, and cushion your retirement budget by as much as a third, or by building your emergency fund to two years’ worth of living expenses. 

Underestimating inflation

One of the biggest retirement risks is inflation. These days, inflation in Israel is largely under control, with an average rate of around half a percent so far for 2020. However, this may change, as some analysts see increasing inflation rates of over the long term. If inflation increases, your cost of living can easily double over time, threatening your ability to maintain your lifestyle.

When planning for retirement, consider the worst-case scenario for inflation and focus on investment strategies that mitigate risk. Learn more about inflation risk in retirement from my blog at 

Going conservative too soon

As a result of extreme market volatility in recent years, many pre-retirees choose to leave the stock market for safer investments, typically low-yielding vehicles. The problem with this strategy is that it doesn’t only reduce your chances of achieving your accumulation goals, but it may also diminish your capacity to generate sufficient income over your lifetime.  

You don’t have to play it too safe. There are ways to invest that a licensed investment professional can help you with that can mitigate market risk, reduce portfolio volatility, overcome the risk of inflation, and still meet your needs. With proper planning and an investment strategy tailored to your specific needs, you need not take any more risk than is absolutely necessary to achieve your objectives. 

For ideas about investment strategies that protect against inflation, call me at 02-624-2788. 

Douglas Goldstein, CFP®, is the Director of Profile Investment Service, Ltd., which specializes in helping people who live in Israel with their US dollar assets and American investment and retirement accounts. He helps olim meet their financial goals through asset allocation, financial planning, and using money managers.

Published June 5, 2017. Updated July 2021

Read more articles