risk management
Introduction and Overview:
The risk of outliving your retirement monies is a very real risk for many retirees. Other than the very modest Age Pension safety net, for most retirees the longevity, investment and other risks are now their risk - not that of an employer, fund or life insurance company.
Pooling of risk is not available to an individual or a couple. Most retirees manage risk by setting up and maintaining buffers in a conservative manner. This simply means that they have a lower standard of living in retirement than is necessary. They can do a lot better than this. They need to directly assess adequacy in making capital usage decisions, and understand the major risks in detail. Most importantly, adjustment mechanisms need to be developed to ensure retirement objectives are met.
The solution: thorough analysis and the production of a financial condition report, and the development of a "control cycle" to allow remedial action to be taken if experience is adverse.