How Do Your Finances Typically Change After Retirement?

During your working years, you use your cash flow to grow your net worth. So you're saving into investment accounts retirement to get your net worth larger. Once you retire, that flips. You start using your net worth to create cash flow. And then that invites and changes several risks. For one, mortality. While you're working, mortality risk is about dying too soon, dying before you're done earning money. That's a specific risk that is difficult to discuss and talk about, fairly easy to solve, especially some life insurance, it usually solves that fairly well. But once you retire, it's not about dying too soon, it's about living too long, outliving your money. So mortality risk changes drastically. Then there's also illness and injury, which is very similar to mortality risk while you're in your working years where you're out of work, you lose that income. That's a huge risk to people's lives. You have things like disability insurance, emergency funds to help close those gaps. In retirement, it puts your assets at risk, not your cash flow. Because now you have things like long term care stays, which most markets, that could cost as much as one hundred thousand to one hundred and fifty thousand dollars a year. Average four or five year stay, that's three quarters of a million dollars. That's a huge risk to your assets. Volatility is another risk that you want to manage that changes in retirement, where it can actually benefit you in your working years through strategies like dollar cost averaging. But in retirement, you have something called sequence of return risk, can erode your assets and make you run out of money far sooner than what your strategy would think. So it's a huge risk to take that changes in retirement. Another one's inflation. During your working years, inflation can help you earn more just through cost of living adjustments, just through your salary growing to help keep up with it. Usually salaries do grow to help keep up with it. Now how much they grow, is it enough? That's a different question altogether. In retirement, that inflation starts eroding the value that your dollar has. And either you need to take more out of your accounts to help keep up with inflation, then puts the risk of running out of money sooner, or your lifestyle starts to go down over time because you're trying to preserve the money that you have. So inflation is another huge risk that you have. So those are kind of four big changes that happen from a risk standpoint in your finances in retirement.