Uncommon Financial Risks Overlooked by Retirees

Retirees need to save enough money to maintain their standard of living during retirement, but they also need to consider other financial risks such as health, inflation, and investment. Mr. Pramoth Rajendran, National Director of HSBC Vietnam’s Personal Finance and Wealth Management Services Division, points out that retirees often overlook these additional financial needs.

Life expectancy, standard of living expectations, and financial situations vary among individuals, but everyone faces common challenges in retirement. These challenges include ensuring steady cash flow, planning for a long life, dealing with inflation, investing wisely, and covering medical costs.

It is crucial for retirees to plan for maintaining regular cash flow for daily expenses and also anticipate issues that may arise post-retirement. Mr. Pramoth Rajendran recommends considering three key risks: longevity, inflation, and investment.

Longevity risk is the financial challenge of living longer than expected, resulting in increased expenses and potentially unexpected medical costs. With advancements in medical technology, reaching the age of 100 is becoming more common, making it essential to have savings and retirement resources to cover daily living expenses.

Inflation risk poses a threat to retirees as rising living costs can erode savings if investment returns do not keep up with or exceed inflation. Therefore, it is crucial to have an investment portfolio that addresses inflation risks while generating regular cash flow to meet daily living needs.

Investment risks associated with retirement planning involve balancing risky assets like stocks, which offer higher returns but come with price fluctuations, and lower-risk assets like bonds, which provide stability but may not address inflation risks. Retirees need to find a balance in their investment portfolio to address these risks effectively. Additionally, considering annuity insurance and health coverage can help mitigate longevity risks and unexpected medical expenses in retirement.