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Types of Risk

A variety of risks fundamentally apply to financial services in general and retirement products specifically. There are also additional risks that would not typically be associated with investments or financial planning that you may want to add to the list. By the end of this chapter, you'll not only be able to add a given risk but will also be in a better position to think through ways to mitigate that risk.

For example, let's say that you and your spouse have dramatically different thoughts on investment risk. Taking this a bit further, assume you're willing to take moderate to high risk levels on a portion of your investment to achieve the potentially greater reward, but your spouse is not willing to take any risk and wants to invest only in products with no risk of principal. The risk here can be defined as the risk of not achieving your retirement goal. If your spouse will not compromise, you have to mitigate the risk of not achieving your goal by increasing your savings or modifying the goal.


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