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You have dreams for retirement. But you need to understand six common risks most retirees face and take steps to protect your retirement dreams from these risks:

1. Health care expenses. Medical costs have risen at more than twice the rate of overall inflation in recent
decades.1 That trend is especially problematic for retirees, who on average spend a greater percentage of their income on health care costs. The Employee Benefit Research Institute estimates that the average husband and wife who turned 65 in 2010 will need roughly $250,000 in savings to pay for health care expenses not covered by Medicare during their retirement.2 Imagine how high these costs could be when you retire.

2. Unexpected events. Unplanned developments in your life can have a major impact on your finances. Some may be personal: a lawsuit, a family member in need. Others may be external, such as changes to tax laws, Social Security or a pension. All of these events could force you to withdraw money from savings and perhaps even jeopardize your retirement accounts.

3. Market volatility. The growing interconnectedness of world economies and the ever-increasing speed of global capital flows have made the markets more volatile than ever. If you don’t have a sound investment plan coupled with an emergency cash strategy, a large drop in financial markets at home or abroad could reduce the value of your retirement accounts. Volatility can be particularly damaging to a portfolio during retirement when you’re withdrawing assets; selling long-term assets at depressed levels can reduce the value of your portfolio, forcing you to lower your income in retirement.

4. Longevity. The risk of outliving one’s assets is of great concern in a time of rising life expectancies and earlier retirements. The average 65-year-old man can expect to live more than 20 years, while the average 65-year-old woman is likely to live at least 23 years. And if you’re married, you have an excellent chance of living longer: A 65-year-old couple faces a 50% chance that one spouse will live past 92, and a 25% chance that one spouse will live to 97.3

5. Inflation. Some economists believe inflation is likely to climb in the years ahead. But even at low rates Inflation can deteriorate the buying power of your savings. In fact, 24 years from now, inflation will nearly double the cost of living for the typical consumer, based on the historical annual average of 3%.

6. Withdrawal rate. Pulling too much from savings early in retirement increases the risk that you could outlive your money. That’s because early withdrawals can leave you with a smaller asset base, which means less opportunity for growth over time. 

Each of these risks can build on the other, making it crucial to manage them all properly. For example, a
market downturn could reduce the value of your retirement accounts, increasing the risk that excessive withdrawals could exhaust your savings early.

By taking action today, you have the potential to make your retirement everything you’ve always dreamed of.
An Ameriprise financial advisor can help you construct a complete plan that includes solutions to address these risks while also helping you meet your financial objectives — all within the context of your individual situation and goals — so you can feel more confident about retirement.



1Bureau of Labor Statistics, February 2011. Refers to period 1965–2010.
2 “Savings Needed for Health Expenses in Retirement: An Examination of Persons Ages 55 and 65 in 2009”, Employee Benefit Research Institute, June 2009.
3Annuity 2000 Mortality Table.

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