Risk Versus Reward During Retirement

Most people dream of a comfortable and secure retirement, so they carefully divert money from their paycheck into a retirement fund. However, we all know that preparing for a successful retirement is more than just saving money in a retirement fund. It’s about investing the money into an activity that helps it grow, generate income, and meet your specific needs. Interestingly, that’s where it gets complicated; you want to grow your investment without risking it all. But here’s the thing, nearly all investment vehicles carry some form of risk. It can be very low risk, but it’s always there. 

Since you’re no longer adding money into your investment vehicle during retirement, the security of your investments becomes even more important. Whatever you choose to invest in, it would be best to understand the amount of risk they expose you to versus the amount of reward they can offer. 

Why So Many Retirees Are Going Back to Work

According to a recent study by the Federal Reserve Board, 1/3 of the people who retire eventually return to work on either a full or part-time basis. And this is true across all income levels. The big question remains, why are so many retirees going back to work? 

First, the pandemic drove thousands of older adults into early retirement. However, inflation, the markets, and other unexpected events are sending them back into the workforce. And while most people don’t retire expecting to go back to work, there are numerous unforeseen reasons why this can happen, including the following: inflation, poor financial planning, in search of additional income, stock market volatility, boredom or loneliness.

If you’d like to avoid the possibility of going back to work, it would be best to take your retirement on a test drive a few years before your actual retirement. Or experiment on a couple of different things during the first few months of retirement before settling on one thing long-term. And always consult a financial planner well in advance to help you develop a solid financial plan. 

Links and Resources:

Target Date Retirement funds Episode

Charlie Munger: The Complete Investor by Tren Griffin