Understanding Retirement Income Challenges

Retirement can bring signifi cant changes to both your lifestyle and fi nances. It represents a time when you may no longer be working, or at least working less, and when your income will likely come from various sources such as your savings and investments, Social Security, and pensions. Ensuring that these income sources can support you throughout your retirement is critical. It requires a plan that seeks to suffi ciently manage common retirement obstacles while also eff ectively responding to unexpected retirement income challenges.

That’s why the Wells Fargo Advisors Envision® process, by planning your investments around benchmarks and life events that hold real meaning for you, can connect you to your investment strategy in a refreshing, revealing, and personal way. Even better, it can keep you apprised of the most critical fi nancial questions, “Can I retire?” and “How do I make the most of my retirement?”

Your vision of retirement requires its own fi nancial strategy that accounts for challenges you may encounter. Your Financial Advisor will work with you throughout retirement to help navigate these challenges and help you realize the goals and dreams you’ve worked so hard to achieve.

As you near retirement, your risk and comfort level may be changing. You may be thinking about balancing the need for continued growth throughout retirement with a desire to help protect your assets and generate income. If you fi nd that your risk mindset is shifting, it is important to address this with your Financial Advisor and determine if adjustments are needed as you move closer to retirement.

Challenges and focus shift over time

During the diff erent stages, your retirement income plan may be more or less vulnerable to certain challenges. For example as you’ll see below, it is critical in the early stages of retirement to help reduce the impact to your assets from excessive market volatility. Keep in mind: these challenges have a greater chance of threatening fi nancial security if you live longer than you planned for.

Key retirement income challenges

Market volatility—A substantial market downturn can have a greater impact on investors who are taking withdrawals and have relatively shorter time horizons. Market volatility can be especially damaging just before or during the early years in retirement when the size as well as the income demands on investment portfolios are relatively large.

Spending behavior—An essential part of retirement income planning is determining sustainable spending levels and strategies. The spending policy that is right for you depends on your personal expenses, longevity expectations, asset levels, and income sources.

Inflation—The longer your time in retirement, the greater the potential that inflation may erode the

purchasing power impacting both your lifestyle and ability to meet your long-term expenses. A good retirement portfolio should balance the need for predictable income with income that can grow and last throughout retirement.

Health care—Modern medical advances mean that people are living longer. However, with longer lives often comes a risk of health issues and the cost of care.

Longevity—Experiencing any of the above challenges becomes amplified when a retiree lives longer than planned for. Longevity, and the risk of outliving your assets, may represent the greatest threat to your retirement security and lifestyle.

The over-arching impact of longevity. Thanks to advances in health care, science, and technology, our life spans continue to increase. Yet longevity also points to the increased need for planning to help ensure essential and non-essential lifestyle expenses are adequately supported for a possible 25 years or more in retirement. Living longer is not a risk in and of itself—it’s actually a good thing. However, where your retirement income is concerned, longevity can amplify and accelerate other risk factors. That’s because longevity is a key factor in determining the severity of the other retirement income challenges. The longer you live, the longer your money needs to last. If your spending behavior only supports a period of 20 years in retirement, but you live well beyond that, you will likely outlive your assets. Likewise, if your investment portfolio is not generating adequate growth to offset the eroding effects of inflation over time, living longer can increase the likelihood and severity of an income shortfall.

Your vision of retirement requires its own financial strategy, which accounts for risks that you may encounter. Your Financial Advisor from Wells Fargo Advisors will work with you before and throughout retirement to help navigate these risks and help you realize the goals and dreams you’ve worked so hard to achieve.

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Moran Wealth Management and Wells Fargo Advisors Financial Network are not a legal or tax advisor. However, we will be glad to work with you, your accountant, tax advisor and or attorney to help you meet your financial goals.