Understanding the risk factors that can come between you and your ability to retire how and when you want is an important step toward meeting your retirement goals. To help increase the likelihood that you’ll have the funds you need when you reach retirement age, keep these four risk factors in mind:

Risk Factor: Longevity

While none of us can predict how long we’ll live, individuals at age 65 have a high probability of spending 20 years or more in retirement. As life spans increase, many people may spend more time in retirement than they spent working.

Risk Factor: Inflation

The longer your time in retirement, the greater the potential that inflation may erode your savings and impact your lifestyle. This makes it important for you to develop an income strategy to help outpace inflation and keep up with the increasing cost of goods and services. Consider this:

• A loaf of bread cost $0.68 in 1990; in 2011 the same loaf of bread cost $1.42. That’s an increase of 109% in 21 years.
  
• A gallon of gasoline that cost $1.02 in 1990, cost $3.55 per gallon in 2011 – representing a 248% increase.

Risk Factor: Market volatility

Today’s financial markets have become increasingly volatile and complex, leaving many people wondering when they’ll be able to retire and how long their retirement assets will last.

• A sudden market downturn may have a significant impact to investors who aren’t well diversified or don’t have time to wait out a market recovery.
• When creating your retirement plan, consider the impact a volatile market could have on your retirement assets. You may be in retirement for 20 or 30 years and the market could fluctuate dramatically during that time.

Risk Factor: Withdrawal strategy

Your withdrawal strategy – the rate at which you draw down savings and investment assets to pay for current living expenses in retirement – plays a critical role in determining how long your income will last. For most individuals, an essential part of retirement income planning is determining an appropriate withdrawal or spending strategy.

Being aware of these risks can help you plan proactively and be better prepared when you reach your target retirement date.