Episode #128: How to Increase Your Retirement Success Probability

Episode #128: How to Increase Your Retirement Success Probability

Retirement risk factors can come between you and your ability to retire how and when you would like. Understanding these risks and understanding the ways that they can be mitigated is very important to consider when working with a financial professional on your overall retirement strategy.

In this episode of Money Script Monday, Adam presents 4 retirement risks and provides insight on managing each risk factor to help you reach your retirement goals.


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Video transcription

Hello, and welcome to another episode of Money Script Monday.

My name is Adam Reyna. I'd like to thank you for attending. Today's topic is how to increase your retirement success probability.

What we'll do today is talk about what retirement success probability is and we'll talk about some of the ways to help increase that by mitigating the four biggest risks in retirement.

Before I get into that, I want to say congratulations because if you're watching this video, that means you're nearing retirement, so you've worked your tail off and you're getting close there.

Number two, you're being responsible and starting to think about ways to help increase your retirement success probability.

And you've probably been working with a financial professional to help you make some of those very important decisions.

So again, congrats on getting to this stage of your working career and hopefully, near a very happy retirement.

Okay, so let's get into it. What is retirement success probability?

At the core, it's are you going to have enough money through retirement?

Depending on life expectancy, desired income, and retirement age, what your advisor is able to do is run what's called a Monte Carlo simulation.

What that's doing is looking at thousands and thousands of data points based on historical performance in different markets. And it's able to give us a projection of what could potentially happen.

Obviously, there's a high-side, there's a low-side, and there's an average. But really what we want to do is increase that retirement success probability as much as possible.

Up into around the low 90s to high 90s would be a very safe place to be as your retirement success probability.

But again, everybody's a little bit different. So, work with your financial professional to help dial that in exactly where you're comfortable.

So, let's talk about the four ways that we can mitigate risks to help increase your retirement success probability.


The first one we're going to talk about is longevity. Longevity is what we call the risk multiplier.

What that means is the longer you're alive, the more subject to these three other risks you are.


There's a more chance that the stock market could go down the longer you live.

There are more chances that tax rates can go up the longer you live and inflation is pretty much going to increase every year.

So, your purchasing power is going to go down. Again, longevity is that risk multiplier. We really want to account for more than enough.

With healthcare quality and life expectancy being longer and longer, that's something that is very real.

If you're 65 now and married, there's actually a 50% chance that you or your spouse will live to age 91.

We want to plan for really the bare minimum of about 25 years, if not even longer.

The way that we can help mitigate risk with longevity is to find something with guarantees, so a guarantee that even if your account balances go to zero, you'll never run of your stream of income.

Again, we want something that has that stream of income, what we sometimes call mailbox money, that will never run out as long as you live. So, it accounts for longevity.

Stock Market

Next, we're going to talk about stock market.

Stock Market

So, here with the stock market, I think everybody knows we want to prevent losses. That's pretty easy, right?

But it's not just preventing losses. Sometimes, what we want to do is take some chips off the table.

When your accounts are doing well, we call it harvesting the gains. So, take some of those gains, that interest earned, and put those into a safe bucket.

Take them out of the market, put them into a place that's less risky and do that as you near retirement. But again, everybody's tolerance is a little bit different.

So, work with your financial advisor and find a comfortable risk tolerance or blend of a portfolio that's going to be comfortable for you.

One that doesn't limit your upside too much, but also doesn't have too much risk, nice, happy medium.

So, that's longevity and stock market volatility.

Income Taxes

Now, let's talk about everyone's least favorite, taxes.

Income Taxes

Right now, we are in a historically low tax bracket. What that means is that there's a very good chance that taxes will be going up.

And one thing that a lot of us do is we put a lot of money into tax-deferred accounts.

Think about when you get to retirement, maybe you have $1 million in your qualified account or your tax-deferred account. You really need to look at that at the after-tax balance.

Maybe reduce that 30% and that's the money that you need to plan for because unfortunately, we do have to pay Uncle Sam.

Also, in retirement there's a very good chance that you're going to be in the highest tax bracket that you've ever been in.

Hopefully, when you retire you're going to have the highest amount of income. And unfortunately, one of your biggest deductions will be gone when your kids are out of the house.

Your home could be paid off, so another large deduction gone.

So, we want to try and get as much tax-free income or tax-free assets as we can when we get to retirement.

Again, we're going to look at tax-free options. So, the best way to do that is to start early and start a tax-free bucket.

Work with your financial advisor because there's a lot of different options that you can use to help mitigate some of that tax risk as you're getting to retirement and again, help increase your retirement success probability.


Finally, inflation, and I think everybody knows that inflation is sometimes called the silent killer.


That's something that's going to be there pretty much no matter what. As the world grows and debt grows the purchasing power of our dollar is going to decrease.

The consumer price index actually stated that something that cost $100 30 years ago now costs $207.

So, over 30 years, that's 107% increase.

What we need to do there, to help mitigate that risk and increase our retirement success probability, is find something that maybe has an increasing income option.

A lot of these vehicles that your financial advisor can recommend that take some of these risks off the table, increase that retirement success probability, have streams of income.

We'd like to be guaranteed. We'd like it to be tax-free, and if we can, we'd like to have an increasing option as well.

That's about all I have for you today. So, these are the four ways that we can help mitigate risk and increase your retirement success probability.

Thank you for attending.

About Adam Reyna

Adam Reyna is a Field Support Representative at LifePro. He coaches hundreds of financial professionals on how to build effective financial strategies that achieve their clients' long term goals and helps them stay educated on the latest industry trends.


This information is meant for educational purposes only.

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