Retirement Corner:
The 5 key risks to your retirement savings

Take 5 minutes to do a quick test and find out whether your retirement savings are at risk. Warning, you may find the answers disturbing!

 1 . What are the chances that at least one member of a healthy 65-year-old couple will live to be 92?
    1. 50%
    2. 25%
    3. 10%

Answer: There's a 50% chance that at least one member of a 65-year old couple will live to be 92. But as people live longer, they also run the risk of outliving their savings.

Chart 1

 2 . How much can increasing your withdrawal rate from 4% to 5% impact your savings?
    1. Very little
    2. Decrease it by more than 20%
    3. Cut it by half

Answer: It may not seem much, but by increasing your inflation-adjusted withdrawal rate from 4% to 5%, you will shorten the number of years your retirement savings will last from 26 to 20 years, in an extended down market, a 23% decrease. Typically, withdrawal rates above 4% increase the chances that you will run out of money too soon.

You should use as conservative a withdrawal rate as possible, particularly in your early retirement years. You should also review your plan each year.

Chart 2


 3 . Over 25 years, how much could a 3% annual inflation rate impact the buying power of your savings?
    1. Not much
    2. It will decrease it by 15%
    3. It will decrease by 50%

Answer: Today, a gallon of milk in the US costs $ 3 (Baht 108). In 2030, a 3% annual inflation rate could drive its price to $6 (Baht 216). As inflation pushes the price of everything from milk to new cars higher, it pushes the buying power of a dollar down. That's why it is so important for your investments to outpace inflation.

Chart 3


 4 . Should stocks play an important role in your retirement savings?
    1. No
    2. Yes
    3. Sometimes

Answer: When it comes to investing in retirement, you can be too cautious. Some people fear losing their nest egg, so they avoid stocks and stick with fixed- income investments. But by doing this, they give up long-term growth potential and risk outliving their money.

You should consider incorporating stocks in your retirement portfolio to balance long-term growth with short-term income needs.

Chart 4


 5 . If a 65-year old couple retires today, how much may they need today to cover future health care costs?
    1. $110,000 (Baht 3.96 mm.)
    2. $330,000 (Baht 11.88 mm.)
    3. $425,000 (Baht 15.30 mm.)

Answer: Surprisingly, health care may end up being one of your biggest retirement expenses. Without an employer-funded health care plan, you may need as much as $330,000 to cover out-of-pocket medical expenses.* And that does not include possible long-term care expenses, which can cost up to $105,000 each year.

You should maximize your savings to meet your long-term expenses. *$330,000 is based on planning ages 92 male and 94 female. To cover health care cost to life expectancy only (ages 82 male and 85 female) an estimated $200,000 is needed.

Chart 5:

For this chart, the estimates assume life expectancy at age 65 of 17 and 20 years, for males and females, respectively. A healthcare cost inflation rate of 7% is used; underlying this assumption are cost of service increase rates that vary by type of service ranging from 4% to 9%. A 5% after-tax rate of return is assumed on savings in retirement. Estimates are calculated for an ‘average' retiree. Actual costs will vary depending on actual health status, area, and longevity.

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