Retirement Life
14 January 2026
Beware: Six key retirement risks to understand
One of the most important aspects of retirement planning is having a deep understanding of the financial risks of retiring and putting strategies in place to deal with them.
The best-laid plans can easily go awry unless risks are taken into account. While we can’t avoid risks, we can certainly plan ahead for things that might go wrong so we are not taken entirely by surprise.
Here are the six key risks you need to be aware of:
1. Longevity risk
Life expectancy is gradually increasing and even if your parents or grandparents died at a relatively young age, this is not an indication that you might suffer the same fate. Some people plan for the risk of dying young by ‘front loading’ their retirement expenditure to get the most out of their retirement in the early years, just in case it is cut short. But they then run the risk of not having enough in later years.
How do you strike the right balance?
Unless you have good reason to expect that your longevity may be curtailed, plan to live a long time. Set aside an amount of money that will give you at least a basic standard of living from, say age 80. The balance can then be enjoyed in the years up to age 80 without fear of running out of money.
How Lifetime Retirement Income helps manage your longevity risk?
Our Lifetime Retirement Income Fund has plans designed for the long haul, managing your funds through to whatever age you choose. And if you'd like to enjoy more spending early on, we can help with that too—while ensuring you still have plenty left in the pot for later in life.
The income you want for the retirement you deserve!
How much would you get a fortnight with Lifetime?
2. Health risk
A long and healthy life is what most people aspire to. Losing good health may mean a more restricted way of life and can certainly increase your living costs. You may have to make alterations to your house or even sell it. You may have increased health care costs including doctor and specialist visits, prescription costs and physical aids such as mobility devices or hearing aids. Long public health waiting lists may force you to pay for much needed surgery.
Health insurance is one way to mitigate this risk; however, premiums rise steeply as you age. Increasing the excess is one way to deal with this. Some people choose to keep a separate pot of money to cover expected and unexpected health costs. The best way to reduce health risk is to lead a healthy lifestyle and have regular medical checks.
3. Inflation risk
The rising cost of living is one of the biggest threats for retirees. Over a thirty year retirement, inflation can eat away at the purchasing power of the money you have carefully saved. Investing conservatively reduces your risk of monetary loss, but the returns on conservative investments don’t keep pace with inflation. A sound investment strategy based on a diversified portfolio will provide the right balance between security and return. Setting up such a portfolio is best done with advice.
How Lifetime Retirement Income helps manage your inflation risk?
Inflation can eat into your money as you move through retirement, making your retirement pot less valuable. Our Lifetime Retirement Income Fund provides the option of increasing your income level each year to buffer against this. Currently we apply an annual income increase of 2% each year to help offset the impact of inflation.
The income you want for the retirement you deserve!
4. Interest rate risk
Central banks control and influence interest rates in order to either stimulate or restrain economic activity as a means of controlling inflation. Investors who rely on interest income to supplement their pension suffer when interest rates inevitably fall as the economy slows. To reduce this risk, supplementary cash for retirement is best to come from a combination of interest, capital gain, and wealth decumulation – that is, running down the value of your retirement nest egg over time. Careful planning is needed to ensure you don’t run down your funds too quickly.
How Lifetime Retirement Income helps you manage interest rate risk?
The investment portfolio Lifetime manages is made of a mix of assets to support the provision of retirement income over the longer term. The assets that are most directly impacted by changes in interest rates currently comprise 27.5% of the total investment portfolio. We actively manage these assets to manage risk while benefiting from the security of securing long term returns from Government backed bonds and loans to Corporations.
The income you want for the retirement you deserve!
5. Market risk
Investment markets go through periods of volatility that can result in financial loss if poor decisions are made. The impact of volatility is reduced by diversifying your investments and ensuring your investment strategy is suited to your investment time frame. It’s always important to have a portion of your funds in stable, conservative investments that can be easily converted to cash to cover your short-term needs. That way, you can ride out market volatility without making losses.
How Lifetime Retirement Income helps you manage market risk?
Meet the Lifetime Retirement Income Fund's Risk Overlay; it's a fundamental part of the value we provide to help preserve your capital. We constantly monitor financial markets and when we feel volatility or risk is at levels not consistent with what we believe is 'normal', we look to move out of global shares and into cash to help protect your money.
The income you want for the retirement you deserve!
6. Political risk
Retirees live with the constant threat of changes in government policy. In particular, policies regarding capital gains, income tax, estate duty, means testing of government benefits, the age of eligibility for NZ Superannuation, rest home subsidies and supplementary government benefits have a direct effect on retirees.
More broadly, legislation regarding such things as access to medication, the operation of retirement villages and aged care facilities also have an impact. It is important for retirees to keep up with these changes. In some cases, you may need specialist advice from a lawyer, accountant or financial adviser to help protect you from adverse effects. Building a team of trusted professionals to help you navigate your retirement will help smooth the way.
Written by:
Liz Koh
Liz Koh is a money expert who specialises in retirement planning. The advice given here is general and does not constitute specific advice to any person.
Invest with Lifetime for a retirement income managed for living.