What is a Financial Risk Management Plan?

David Roberts
August 15, 2022

Financial risk can be frightening, especially when it comes to your retirement plan. That’s where a financial risk management plan comes in. A financial risk management plan looks at potential risks and finds ways to avoid them. And if they can’t be avoided, lessen them. Here are some ways that financial risk management consulting can help you reduce the risk of your retirement plan. 

DEVELOP YOUR PERSONAL RISK TOLERANCE

In your retirement plan, your risk tolerance is likely to become lower as you near retirement. For the risks that you do take, you want to make sure that they are calculated ones. This will involve looking at the markets in a rational way and using research and common sense to guide your decisions. 

LEARN THE MATH

You will also want to learn how to read indicators and ratios such as the price to earnings (P/E) ratio. Learning these indicators will help you better understand the market and be able to plan accordingly. Financial risk counselors specialize in understanding these risks and how they might impact your retirement plans, and use this knowledge to build low risk retirement plans.

DIVERSIFICATION

A key aspect of keeping the financial risk of your retirement plan low is through diversification. Basically, don’t put all your eggs in one basket. It is good to hold a variety of different investments so that, if one loses value, other investments may remain the same or increase. This can lessen the risks associated with market changes, giving you peace of mind as you prepare for retirement. 

Financial risk management counseling is a great tool to use, since these professionals can look at your situation and help you create a diversified portfolio that meets your retirement needs.

WATCH FOR INFLATION

Inflation is another risk that could impact your retirement. Rising inflation rates can make your money worth less in the future than it is today. To protect against this effect, it’s good to consider investments that grow with inflation. Such investments may include stocks and Treasury-Inflation Protected Securities. 

Treasury-Inflation Protected Securities (or TIPS) are government bonds that have returns that vary with inflation rates, giving you compensation if inflation increases. Financial counselors can help you get set up with these investments, which will help to lessen the effects of inflation-related risks.

CHECK YOUR INVESTMENTS

While you may not want to check your retirement investments every day, it is good to review these long-term investments when major life events occur and/or at least once a year. When you do check your investments, it is important to consider if your risk tolerance has changed and adjust your portfolio if necessary.

CREATE A PLAN

Financial risk can be worrying. Luckily, with financial risk management you can identify your financial risks and responses so you can have peace of mind in your retirement plan. If you feel overwhelmed by the process, getting financial risk management counseling is a great way to get professional help customized to your situation and needs.

What Accounts Should You Consider If You Want To Save More?

What Accounts Should You Consider If You Want To Save More?

Investors often ease into their savings strategy with small investments into their 401(k) plans. Later, as their finances allow, they “graduate” into other investment vehicles for their retirement nest eggs, such as IRAs and taxable accounts. As their financial lives become more complex, many investors will ask, “If I have a fixed sum of money to invest every month or every year, what accounts should I consider if I want to save more?”

Will Your Social Security Benefit Be Reduced?

Will Your Social Security Benefit Be Reduced?

Choosing the optimal time to start receiving your Social Security benefit is an important step toward ensuring that your retirement income and savings will last throughout the rest of your life. No one wants to leave benefit dollars on the table due to a poor timing decision, not even those who have adequate savings and pensions and are not relying upon Social Security to fund their retirement. The problem folks are facing, though, is that choosing an optimal time to claim their benefit is neither simple nor straightforward.

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