Over the past 30 years, many forces have impacted retirement planning. Among the most disruptive are longevity, interest rates, financial entertainment, and risk management. While these factors have created many opportunities for investors, they have also created many challenges.

Retirement used to span 10 years for most people. Due to increasing life expectancy, retirement can now take up to two or three decades. According to the Social Security Administration, a man reaching age 65 today can expect to live until approximately age 84. A 65-year-old woman can expect to live until approximately age 86. About one out of every three 65-year-olds today will live past age 90, and about one out of seven will live past age 95. Only 30 years ago, men were only expected to live to age 72 and women to age 75. While this is certainly great news, it also poses a challenge for developing an adequate retirement plan that spans 30 to 35 years. Given today’s lower interest rates, this has proved to be a difficult task for many.

Investors in the 1980s earned double-digit interest rates off Treasuries and certificate of deposits. Fixed income investors painfully recognize that this has changed, as today’s rates are lower than they’ve been for 60 years. This has had a profound impact on those needing income, and many investors have adapted by buying high-quality stocks. The shift from fixed income investments to stocks may bring these investors increased volatility, but with it the potential for returns that outpace inflation.

Financial cable channels started in the late 1980s. Like other television networks, these businesses are bottom-line focused. Many of the financial personalities gain viewers (which translated into advertising revenue) by selling fear with attention-grabbing headlines. Just because an investment is featured on television (or the internet) doesn’t mean it actually works or is appropriate for you.

Investors can adapt to inevitable volatility and market pullbacks by incorporating a risk management strategy with their financial advisor. Market downturns are bound to happen within every economic cycle. In fact, almost every year we have a pullback of 10%. While these events are unavoidable, investing in different types of securities with different levels of risk may help mitigate the adverse performance of any one investment.

A purposeful approach to investing, or active management, consists of selecting investments based on specific needs or criteria to help pursue a desired goal. There is a decision-making process for every investment in the portfolio tied to specific goals. We help clients focus on what is important and create a risk and investment management strategy that is flexible enough to adapt to future economic conditions.

If you are interested in professional financial guidance, contact Kim and Korey at the Kletschke Wealth Management Group in the Stifel Sioux City office today!