5 key risks to retirement income

Inflation is a big one but there are other things to prepare for



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Income splitting 295Inflation is the single biggest risk for retirees, with 58% of pre-retirees and 45% of retirees worried about the potential for rising prices to erode purchasing power, finds a Fidelity Investment survey.

“Inflation hurts retirees more than any other group,” says Peter Drake, vice-president, retirement and economic research, Fidelity Investments Canada. “In retirement, you have to plan for inflation because it can do a lot of damage over the long term.”

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Additional risks include:

  • healthcare (53% of pre-retirees are concerned vs. 42% of retirees);
  • asset allocation (46% of pre-retirees vs. 31% of retirees);
  • running out of money (46% vs. 30%); and
  • longevity (49% vs. 33%).

The survey also found that 62% of pre-retirees expect to continue working in retirement, and 54% of those that work do so for financial reasons. Meanwhile, 27% of retirees are currently working at least part-time.

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Still, 85% of retirees have a positive outlook on retirement.

Drake cites three key observations on retirement from the last decade.

1. Working in retirement is not a retirement plan.

2. Inflation is a risk to retirement income.

3. Financial advisor is key to retirement fulfillment.

This article originally appeared on advisor.ca


One comment on “5 key risks to retirement income

  1. This is an important article. I am increasingly presented by advice in the media on “encore careers” during the retirement years, and it appears that many pre-retirees accept that scenario (62% expect to, 54% expect to do so for financial reasons) yet currently only 27% of retirees are working. Is it likely that the percentage of working retirees will double within the next few years? It appears to me that the message that needs to get out is: Don’t expect that you will be able to work in retirement; accordingly, save money during your working years so that you can afford a work-free retirement.


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