Considering economic conditions, what risk factor should Robert avoid as he approaches retirement?

As Robert approaches retirement, the most important risk factor he should consider avoiding is longevity risk. Longevity risk refers to the possibility of outliving one’s retirement savings, which can be a significant concern, especially as life expectancy increases. With longer lifespans, individuals must ensure that their financial resources can sustain them throughout retirement, a time frame which can stretch into several decades.

By focusing on longevity risk, Robert can make informed decisions about how to allocate his resources effectively, potentially opting for guaranteed income products like annuities that can provide a steady income stream for life, thus mitigating the risk of depleting his assets. This is crucial since, unlike other risks that can fluctuate or be managed through diverse investments, longevity risk is a certainty—if Robert lives longer than expected, he would face the real threat of running out of money.

While the other risk factors like market risk, inflation risk, and interest rate risk are indeed significant in their own right, they can often be managed and mitigated through careful investment strategies, diversification, and planning. However, the challenge of longevity risk underscores the need for a stable income strategy and poses a unique challenge as it directly relates to an individual’s life expectancy and financial sustainability in retirement. Thus, priorit