Throughout the years leading to retirement,
investors are focused on accumulating and growing their
financial wealth. During this stage of life, the main risk
they face is market risk — the risk that they will
lose money due to market downturns. Once investors enter
retirement, however, they face not only market risk, but
also mortality risk.
Mortality risk is the risk of you or your spouse outliving
your money. Investors need to keep in mind that the average
life span is just that — an average. Fifty percent
of people will have life spans longer than the average
and fifty percent of people will have life spans shorter
than the average. If you're not eligible for a pension
and you're concerned about outliving your money, you should
consider an annuity.
There are many different types of annuities, but the general
idea is that you give an insurer a certain amount of money
and in return the insurer provides you with regular payments
for either a certain period of time or the span of your
life. When added to a diversified portfolio, annuities
provide a floor for your income stream. An annuity ensures
that at least some amount of money will be flowing into
your pockets for the rest of your life.
Your financial adviser can help you assess which financial
products and asset classes to include in your allocation
to help you achieve your financial goals.
Professor
Roger Ibbotson, Yale University, chairman and founder
of Ibbotson Associates
Professor
Roger Ibbotson, Yale University, chairman and founder
of Ibbotson Associates 