Understanding Five of the Key Risks

  1. Longevity

    Many people underestimate their lifespan and risk outliving their assets. The facts indicate that half of the population outlive the "average" life expectancy. A successful lifetime income plan should address the probability of you and/or a spouse living well into your 90s.

  2. Inflation

    The anticipated longer retirements and the impact of inflation make it more important than ever for portfolios to include investments with the potential to outpace inflation.

  3. Asset Allocation

    An overly conservative portfolio can expose retirees to the risk of outliving their assets, while being too aggressive may increase the potential for portfolio losses. A key to long-term success may lie in balancing portfolio income with portfolio growth.

  4. Withdrawal Rate

    A more conservative withdrawal rate could dramatically decrease the likelihood of retirees outliving their assets. Clients need to understand how much they may need to save to meet their lifestyle goals.

  5. Health Care Expenses

    Fidelity estimates that a married couple retiring today at age 65 will need approximately $250,0001 for uncovered health care costs during their retirement, not including long-term insurance or care.2

    • Fidelity Consulting Services, 2010

    • Assumes no employer-provided retiree health care coverage and life expectancies of 17 years for a male and 20 years for a female. See "Methodology and Information" for further details.

Methodology and Information:
Estimates are calculated for "average" retirees, but may be more or less depending on actual health status, area, and longevity. Assumes no employer-sponsored retiree health care coverage. Assumes retiree has traditional Medicare, elects Medicare Part D, and receives full government Part B subsidy. Assumes a health care cost inflation rate of 6.7% based on various service cost increases, ranging from 4% to 8%. Estimates are representative of amount needed in a taxable account. Assumes medical costs are incurred uniformly annually after age 65, and assumes an after-tax rate of return of 4% in retirement. Savings amounts do not include expenses related to over-the-counter drugs, dental care, nursing home care, or nursing home (long-term care) insurance.

Diversification seeks to reduce the volatility of a portfolio by investing in a variety of asset classed.  Neither asset allocation nor diversification guarnatee against market loss or greater or more consistent returns.