Four Key Risks That You Will Face During Retirement

Social Security and defined benefit pension plans have traditionally been the main sources of guaranteed lifetime income. Social Security benefits are becoming less adequate for today's and tomorrow's retirees, however, because of changes already enacted into law, changes in family work patterns and the likelihood of future financial problems. Moreover, according to the Employee Benefits Research Institute, there were 27.2 million active participants in defined benefit pension plans in 1973-1974 but only 20 million by 2003-2004. After factoring in workforce expansion over that period, the percent of non-farm wage and salary workers participating in defined benefit plans decreased from 43.7% to 16.8%.¹

As a result of these changes, it is more important than ever for you to protect your investment portfolio against the four key risks you will face during retirement:

• Longevity risk is the risk that you will outlive your assets. Americans today must plan for the very real possibility that their retirement will last 25 or 30 years, and possibly longer. Consider, for example, that one member of a healthy 65-year old couple has a 63% chance of living to age 90 and a 3% chance of living to age 95.²
  
  
• Market risk is the risk of loss from fluctuations in security prices. Market downturns, particularly those that occur during the initial retirement years, can significantly reduce a portfolio's value.
  
  
• Inflation risk is the risk that growth of your retirement savings will not keep pace with inflation, which is simply the rising cost of goods and services over time. Inflation's corrosive effect on the value of your assets can be significant. For example, between 1980 and 2000, the average annual inflation rate was 4.1% -- in a rate that led the dollar cost of goods and services to more than double during this twenty-year period.³
  
  
• Healthcare risk is the risk that growth of your retirement savings will not keep pace with rising healthcare costs, which have been increasing even faster than inflation. Annual healthcare costs increased by an average of 6.2% between 1980 and 2000,⁴ a rate more than 50% greater than inflation's 4.1% average increase.

Guaranteed lifetime income products, such as the Lifetime Income Annuity, can help protect your portfolio against all of these risks.⁵

¹ Employee Benefits Research Institute Historical Statistics issued May 2004.
² From a presentation -- Optimal Asset Allocation Within & Without Payout Annuities -- By Moshe Milevsky at the NAVA 2003 Retirement Income Conference. Data: Society of Actuaries RP-2000 table.
³ U.S. Department of Labor Bureau of Labor Statistics (http://data.bls.gov/PDQ/servlet/SurveyOutputServlet).
⁴ U.S. Department of Labor Bureau of Labor Statistics (http://data.bls.gov/PDQ/servlet/SurveyOutputServlet).
⁵ The Lifetime Income Annuity is issued by, and backed by the financial strength of, New York Life Insurance and Annuity Corporation, a wholly owned subsidiary of New York Life Insurance Company.

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