Retire With Purpose - The Retirement Podcast 518: Beyond Investment Risk: Why Income Risk Could Change Your Retirement Plan
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Aug 29, 2025 Explore the often-overlooked concept of income risk in retirement planning. Discover why traditional financial models might leave you exposed and how they can be enhanced by personalizing your strategies. Learn about different types of income risks and their implications, especially for younger investors. Gain insights on how to adjust your investment strategies based on your proximity to retirement and individual circumstances. The conversation emphasizes the importance of preparing for income disruptions in an ever-changing economy.
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Income Risk Often Overlooked
- Traditional financial planning focuses on investment returns while largely ignoring income shocks that can derail retirement plans.
- Incorporating income risk reveals vulnerabilities that static calculators and simple Monte Carlo models miss.
Three Distinct Income Risks
- The research identifies three income-risk types: transitory, permanent, and income-market correlation risks.
- Each type affects optimal portfolio risk and retirement timing differently, especially near retirement.
Buy A Buffer Before Going All-In
- Build an emergency liquidity buffer before adopting aggressive equity allocations when you're young.
- Use that buffer to buy time if career shocks or market drawdowns occur, just like retirees use a buffer.
