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Chapter 3. Establishing an Income You Ca... > Risks to Consider During Your Retire...

Risks to Consider During Your Retirement

As you consider the income that you require for retirement and the ongoing process of managing your assets postretirement, you may want to take into consideration the following risks that we have not discussed in this chapter and their impact on your retirement:

  • Market Risk. This is the risk associated with the stock and bond market. Until a few years ago, many younger investors thought that the stock market was a one-way street leading to an early retirement. This makes sense for the younger investors because they had really never seen a bear in the woods the size of the one that hit Wall Street as the Internet bubble burst into many people's retirement funds.

  • Business Risk. This is a significant risk today because investors and the government are requiring publicly held corporations to operate in an environment that is more open and honest to the investor. Accounting rule changes have also forced companies to be more open with investors as relates to accounting issues to reduce manipulation of the numbers that could paint the financial picture of a company different from its reality. Business risk can also be associated with an industry or sector that is not performing well.

  • Interest Rate Risk. Many people buy bonds and bond funds. As interest rates rise, the value of your bond or bond fund will fall. Conversely, as interest rates go down, your investment is worth more.

  • Life Expectancy. In this case, good news could be bad news. The good news is that you're living longer. The bad news is that life costs more money and you have to be prepared so that you don't outlive your income.


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