If you really think about it, there is risk in almost everything we do. As journalist and economist Allison Schrager has noted, people often manage risk in their lives and careers in surprising ways.
The description of a book that she wrote on risk management says it well: "Whether we realize it or not, we all take risks large and small every day. Even the most cautious among us cannot opt out--the question is always which risks to take, not whether to take them at all."
Now, for retirees, one of the major risks to financial security is sequence risk. What is that?
It's the probability of having losses early in retirement or just before you retire. Financial pundits fondly call this period the "retirement red zone."
Even a 15% loss can throw a retirement plan off track, especially if you are already taking money from your accounts for income. Then it simply compounds the losses.
It's a challenging time for retirees, who now are taking a triple-hit. Never-before-seen market swings are reducing the value of their portfolios. The novel coronavirus pandemic is shutting down many workplaces, which means that workers don't have regular income to save.
Many retirees who are still working were likewise affected. And low interest rates continue to be unfriendly to retirees with fixed-interest holdings.
Meanwhile, Michael Finke, professor of wealth management at The American College of Financial Services, points out another area to keep an eye on: how the pandemic is affecting the probability of success of our retirement plans.
