Retirement planning saving for retirement

Will the Four Horsemen Trample Your Retirement?

After decades of working and saving diligently, you are probably looking forward to a steady stream of income to fund an enjoyable and productive retirement. What many retirees do not realize, however, is that there are four key factors that could turn their dream retirement into an underfunded nightmare if they are not properly anticipated and addressed in their retirement plan.

We call these factors the Four Horsemen of Retirement.

(The White Horseman). Longevity in and of itself is not a bad thing, of course, but this Horseman counts on you to fail to plan for a long life and thereby leave yourself vulnerable to running out of money in your later years. People are now living much longer in retirement than they did fifty years ago. 

(The Red Horseman). This Horseman is particularly devious, as he will make all the reasons to overspend seem logical and appealing, and therefore tempting. Additionally, this Horseman is stealthy; often you will not even know you are under his spell.   

(The Black Horseman). This Horseman has not reared his ugly head in some time, but rest assured, you want to be prepared when he shows up. Consider the 1970s, which had an annual inflation rate of approximately 7%. Talk about a massive loss of purchasing power. . .

(The Pale Horseman). No one knows what their investment returns will be in the first few years after retirement (or in any years), but an overly aggressive portfolio coupled with a poor sequence of returns early on can do irreversible damage to your retirement. Look at the returns for U.S. stocks in 2000, 2001, 2003 and 2008. When this Horseman strikes, he often comes out of nowhere and hits particularly hard. 

One of the best tricks these four villains play is to try to convince you they are just myths from a former time that are no longer relevant in today’s world. Ignore them at your peril, for they are real and are poised to visit your retirement plan.

If we wish to defeat the Four Horsemen, our first order of business is both acknowledging their existence and understanding who they are (Part I of the series). Next, we will delve deeper into each Horseman’s characteristics followed by the protective measures you can take to guard your assets (Part II of the series). However, it is important to understand there are no silver bullets in this battle, and measures taken to guard against one Horseman can leave you vulnerable to one or more of the others.  Your own battle plan for generating reliable income in retirement is unique to your specific situation and tailored to your tolerances and needs. Lastly, we will explore some broader strategies that investors can employ to armor their assets against these dastardly foes (Part III of the series).

Will your retirement plan be ready to fend off the Four Horsemen?

Stay tuned for Part II of this series.

Don’t have a retirement income plan? Please click below to schedule a no obligation consultation. 

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Jeff Rotherham, CFP®, MSAFP

Jeff Rotherham, CFP®, MSAFP

Jefferson Rotherham is a Certified Financial Planner® and Orion's Director of Financial Planning. Over the course of his career, Jefferson has developed and monitored hundreds of financial plans for clients in a wide range of circumstances. Prior to embarking on his career in financial planning, Jefferson served in the U.S. Navy for 20 years.

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