3 Signals That Reveal Why It’s Risky to Put Your Retirement on Autopilot

autopilot retirement risk

From Birch Gold Group

There are plenty of ideas today that sound good at first, and then end up being too good to be true. Being able to set your retirement on full autopilot is one of those ideas.

Of course, that doesn’t mean you can’t automate some parts of your retirement, but it’s risky to “set it and forget it”.

Let’s start with a few “evergreen” reasons you should consider keeping a close eye on your retirement instead of putting it on autopilot.

First, your life circumstances may change suddenly. A major health issue, divorce, marriage, or family member may force you to adjust your retirement and account for your new circumstances. Over at The Motley Fool, they suggest one possible solution:

The only way to accurately plan for these changing expenses is to draft a new retirement plan with a new savings goal.

Next, as you get older, your ability to deal with investment risk changes and needs to be accounted for on a continual basis. According to The Motley Fool:

You must reevaluate your portfolio periodically and reallocate your money, if necessary, or else you could leave yourself exposed to too much risk as you age.

Finally, since you probably don’t have a crystal ball that sees the future, you can’t assume your investments (and savings) will keep growing. The Fool suggests:

Rerunning the numbers once per year, [so] you can make slight adjustments to your savings rate to account for the variable growth.

Knowing when to start making adjustments is crucial. Sometimes, the economy sends out signals that warn when it’s time to take your retirement plan off autopilot. Here are three big signals you should keep your eye on right now.

Signal #1 – The Pension “Black Hole”

There is over $5 trillion worth of market-based public pension debt spread across all 50 states. With projected returns almost always overshooting actual returns, it’s only a matter of time before public pensions will be running on fumes.

Corporate pensions aren’t off the hook either. With a total of $2.7 trillion in debt, some company pensions are underfunded, while some are on the brink of termination.

Signal #2 – The Saddening State of Social Security

The clock has been ticking for something to be done about Social Security for quite some time. In fact, according to a Motley Fool piece, Congress has known for 34 years that something needs to be done, but has offered little in the way of a meaningful solution so far.

Paying more taxes or having to wait longer to claim benefits you’re entitled to seem to be the only “solutions” Congress has. But something meaningful needs to be done before 2034.

Signal #3 – Hope From The Uncertain Fed

Chairman Powell’s recent remarks signal “dovish” behavior that, as he stated, “will act as appropriate to sustain the expansion, with a strong labor market and inflation near its symmetric 2 percent objective.”

The market reacted by climbing on “hope” that rates will get cut. But uncertainty is the name of the game for the Fed as the infamous “dot plot” indicates an incoming rate hike, which is hawkish.

Forbes highlighted the recent dot plot (emphasis ours):

June’s dot plot showed many estimates coalescing near a 3% Fed funds rate in 2019 and around 3.5% by 2020. The current rate is between 1.75% and 2%, up from around zero just three years ago.

The bottom line is that you shouldn’t risk your retirement on what experts “hope” the market will do, nor how the uncertain Fed is “behaving.”

A better idea is to re-evaluate and adjust your retirement plan according to how it is performing.

Move Away from “Risk” and Closer to “Reward”

Here are some ideas to consider, so you can minimize your retirement risk…

Social Security shouldn’t account for the entirety (or even most) of your retirement income. Most experts agree that it is designed to replace only about 40% of your income earned, on average.

Don’t put all of your “nest egg” into a public or corporate pension. Both have obvious risks which should leave you asking questions.

Finally, consider diversifying your assets. Diversification is a strategic way to protect your hard-earned savings. Diversifying with an asset like physical gold and silver is a popular option because of their history of security and growth during uncertain times.

Plan your retirement, and continuously adjust that plan as you see fit. But never just “set it and forget it.”

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