Risks associated with the spend down of retirement funds
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Risks Associated With the Spend-down of Retirement Funds. Presentation from Group 3 . Introduction. What is RISK?. Risk is the potential that a chosen action or activity (including the choice of inaction) will lead to a loss (an undesirable outcome). 

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Risks Associated With the Spend-down of Retirement Funds

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Risks Associated With the Spend-down of Retirement Funds

Presentation from Group 3


What is RISK?

  • Risk is the potential that a chosen action or activity (including the choice of inaction) will lead to a loss (an undesirable outcome). 

  •  Potential losses themselves may also be called "risks".

  •  Almost any human endeavour carries some risk, but some are much more risky than others.

Risks in Retirement

  • Retirement spend-down? 

  • Retirement planning?

  • There are many things that could go wrong even with a carefully planned retirement. . A recent Society of Actuaries survey of 804 people ages 45-80 identified greatest retirement concerns

What could go right?

Ample savings + wise investments + favorable conditions = Happy Retirement!

What could go wrong?

These common retirement worries may become YOUR reality:

  • Longevity

  • Inflation

  • Stock market slumps

  • Health expenses/ Long term care costs

Longevity Impact

Failing to plan for a longer than average lifetime can lead to an underfunded retirement

More than 6 in 10 underestimate their life expectancy

  •      -67% of retirees and 61% of pre-retirees underestimate

  •      -50% of people will live longer than the average life expectancy

Social security timing

  • Monthly benefit increases 75% if a person waits until age 70 to begin receiving benefits

  • Individuals have to decide what time frame works best for them

    Decrease in income from spouse passing away

  • Pension reduction

  • Social security reduction

Inflation Impact

Why is Inflation bad?

  • It can cause your money to have less value.

  • Need to withdraw more principal than expected

  • The retiree wants low inflation and doesn't want high inflation

What is the most likely scenario:

  • The market expects to see about 2% inflation for the next ten years

  • Historically, inflation

    has been around 3%

  • How should a retiree respond?

Stock Market


  • Bonds

  • CD

  • Stocks

  • Best case scenario Vs. Worst case scenario

  • In conclusion, higher the return rate (investing in stocks, especially in small-cap market), the more risk involves. And vise versa. It is really hard to predict what most likely happen to one’s retirement plan when one retires, because it really depends on how one diversifies the portfolio. Moreover, the stock market can fluctuate dramatically. Letting the expert handle your plan will be the best solution, since they know better.


Healthcare Cost Exceed Healthcare Savings

  • Rising healthcare costs

  • Disability Insurance costs

  • Nursing home costs

  • Assisted Living costs

  • Hospital Stays, Prescription costs

Best Case:

  • Pay for higher healthcare premiums

  • No chronic health conditions

  • MORE..

    Worst case:

  • Pay for higher healthcare premiums

  • Many chronic health condition

  • MORE..

Most likely case:

  • Pay for higher healthcare premiums

  • One chronic health condition (80%)

  • No disability (19.7% disability among the elderly, and it’s decreasing)

  • Few visits to the hospital, a few prescriptions


To Recap, the Four Main Risks to Spending-down Retirement Funds:

  • ·         Longevity

  • ·         Inflation

  • ·         Stock Market Slumps

  • ·         Health Expenses/Long-term Care Expenses

    And they all interact with one another

Thank you for your time!!

Group Members

  • Introduction UjalaRizwan

  • Longevity Impact Joseph Stowell

  • Inflation Richard Hersch

  • Stock Ki-Heul Kim

  • Health Care Elizabeth Castilano

  • Conclusion Zachery Mountel

  • PPT compilation Junkai Zhang

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