The three horsemen of the retirement apocalypse.

Dramatic, yes.  Accurate, yes. Scary, maybe.

I consider the most significant risks to a healthy and well-planned retirement:

  1. Low-Interest Rates
  2. Inflation
  3. Healthcare Costs

The 2nd quarter of 2021 was marked with expansive growth in both GDP and, more importantly, inflation.  As communicated in the Quarterly Economic Update, “According to the Federal Reserve Bank of Atlanta’s economic model, the US GDP growth is tracking toward 8.3% real rate of growth in the 2nd quarter, and preliminary data makes that number look realistic.

Interest Rates

Readers of these letters know I have discussed the potential risks of significantly low-interest rates to retirees in the past, many times.  While a low mortgage rate has been a critical driver of economic returns and real estate appreciation, low rates can cause significant damage to a retirement portfolio. They lower the yield on low-risk investments like CDs and bonds, which retirees count on for income.  Many of the return assumptions used by planners involve a portion of growth and a portion of fixed income assumptive returns.  If the fixed income portion returns are very low, this forces more assets into the growth areas and may increase the overall stress of the portfolio outside the client’s comfort; adding too much risk.

Low rates may also affect the costs of insurance, both life and long-term care, as insurance companies count on the returns in their investment portfolios to offset premiums, making many policies more difficult and costly to acquire in our older age. Lastly, low rates force money into the system (sometimes artificially), driving up the prices of the goods and services we use daily.  This phenomenon is called:


Inflation is on the rise.  If you are within ten years of retirement (already retired counts), inflation may be the single largest detractor to your retirement plan, more so than poor single year market returns.  Use this calculator to understand your risk (the inflation risk is real).

Consumer prices increased 5.4% in June from a year earlier, the largest monthly gain since August 2008, which if we exclude food and energy, inflation increased 4.5%, the largest move since September 1991.  What goods and services you enjoy right now may very well DOUBLE in cost if your retirement timeframe is outside 13 years!

Healthcare Costs

Every plan I have ever written includes a chapter on long-term care planning, and many times, this is either overlooked or accepted as a fact of life and risk in our financial lives.  However, for those of us in the retirement generation, these costs can be a significant factor in our ability to be physically and financially able to do what we want to do.

While for many of us these costs are a faraway issue, I think it’s important to know the costs that we ignore.

Annual Median Costs including an annual increase of 3%:

2020 2030 2040 2050
In Home Care        
Homemaker Services $53,768 $72,260 $97,111 $130,509
Home Health Aide $54,912 $73,797 $99,177 $133,286
Community and Assisted Living
Adult Day Care Facility $19,240 $25,857 $34,750 $46,701
Assisted Living Facility $51,600 $69,346 $93,195 $125,247
Nursing Home Facility
Semi-Private Room $93,075 $125,085 $168,104 $225,917
Private Room $105,850 $142,254 $191,177 $256,926>

While the economy is roaring (and may continue to do so), the three horsemen of the retirement apocalypse (low-interest rates, inflation, healthcare costs) are alive, well, and working out.

Action Items for 3rd Quarter:

  1. Double-check beneficiaries on insurance policies to match your estate plan
  2. Insurance plan audit, understand premiums, death benefit, and living benefits that may be available.
  3. If charitably inclined, give appreciated stock to your favorite charity while we are still at market tops

    • Also, consider utilizing a Qualified Charitable Deduction instead of assets or cash if you currently take RMDs and donate to a charity.

  4. Review Cash Value Insurance Asset Allocation and premium requirements

Philip Clark, CPWA®, CFP®| Director – Wealth Management
Direct: 626.788.3947

This information should not be construed as tax advice, nor should be taken as financial planning advice. Please consult your tax professional. These opinions are based on observations and research and are not intended to predict or depict performance of any investment. These views are as of the close of business on 07/20/2021 and are subject to change based on subsequent developments. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. These views should not be construed as a recommendation to buy or sell any securities. Past performance does not guarantee future results.

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