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Retirement planning has always been complicated because retirees face several dangers, including surviving the money (hardship risk), loss of funding (market risk), unexpected health expenses (health risk), unexpected needs of family members (household risk), and even cuts to retirement benefits (policy risk). The questions are: 1) How significant are these dangers? And 2) Do retirees accurately perceive these risks when making their consumption and investment choices?
Since 2018, First Eagle Investment (Trades, Portfolio) has collaborated with the Boston College for Retirement Research (CRR) core to enhance insights and actionable tools for plan sponsors, advisors, and financial professionals. Leveraging CRR's long history of academic analysis and First Eagle's long history of purposeful events, together we are dedicated to serving as a constant resource in assisting yank workers on their journey to secure retirement.
This content is part of a comprehensive collection of insights exploring the key challenges retirees face in the years leading up to and during retirement. Other issues address how worker store differs from their business-backed retirement plans, what affects retirement spending, and the impact on healthcare costs for different segments of the retired population.
Introduction
Retirement planning has always been difficult because retirees face many risks, including surviving their money (risk of hardship), investment losses (market risk), unexpected fitness costs (risk of hardship), unexpected needs of family members (risk of family unity), and even cuts to retirement improvements (risk of hardship). The questions are: 1) How vital are these risks? And a couple of 2) Do retirees safely understand these risks when making their consumption and investment choices?
The story continues
To answer these questions, this summary, which is a response to a previous article, systematically assesses and classifies the impacts of these numerous risks, both from an objective and a subjective point of view.1 That is, it quantifies the magnitude of the objective risks that retirees face, repeats the undertaking for retirees' subjective perceptions of the dangers, after which it compares both. The assessment, which makes use of statistics from the Fitness and Retirement study, consists of developing a life-cycle optimization model to quantify all the odds by estimating how much wealth retirees are inclined to forgo rather than hold onto.
