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Financial professionals may be missing opportunities to help clients understand key risks to their retirement security in these challenging times, according to a study by Allianz Life Insurance Co. These include longevity risk, behavioral risk, market risk and inflation risk.
The study identified several common risks and the opportunities they present for financial professionals to better serve their clients:
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Most Americans are unprepared for when and how retirement will happen. Perceptions of working Americans about when their retirement will start and what it will look like are much different from the experiences of people already in retirement.
This disconnect is putting the financial security of those nearing retirement at significant risk.
Given the earlier, sometimes forced, retirements during these times, a lack of retirement income planning can be particularly troubling, because a longer time spent in retirement means a longer time covering expenses.
Financial professionals can help non-retirees prepare – regardless of when their retirement starts – by highlighting retirement risks and advocating for the addition of guaranteed retirement income solutions.
Americans' lack of discussions about risk is hindering their retirement readiness. The retirement savings system that today's retirees experienced during their working years (such as pensions) has largely gone away, placing a greater responsibility on non-retirees for sound retirement planning.
Yet despite this, non-retirees are putting their retirement goals in jeopardy by not discussing with their financial professional a number of significant risks to their retirement security.
Financial professionals need to be proactive in discussing these issues and working with their clients to develop potential solutions.
Americans aren't making the connection between aging risk and inflation risk. The rising cost of living is a particular concern to current and future retirees, because these costs can continue to creep up over a long retirement. Even greater concerns exist about rising health-care costs.
Yet as costs continue to escalate at a rapid pace, people are not preparing adequately and may find themselves living on a fixed income with many of their crucial expenses not covered through a long retirement.
Financial professionals can advise clients about how increasing income solutions can help manage inflation risk, especially as they age.
"When it comes to planning for the future, life often throws us a curveball that can derail our expectations," said Kelly LaVigne, vice president of consumer insights for Allianz Life. "The sooner people realize this, the sooner they can develop a retirement plan that provides the flexibility to change course without too much disruption to long-term financial security."
The complete report, "Do Americans Understand all the Risks that Can Derail a Retirement Strategy?" is available at the Allianz website.
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Alan Goforth
Alan Goforth is a freelance writer in suburban Kansas City. In addition to freelancing for several publications, he has written a dozen books about sports and other topics.
