Hi everyone, Vince Oldre, certified financial planner with Assure Retirement Group and I want to talk to you about the three risk measurements for retirement. The one that everyone talks about is your risk tolerance. Now your risk tolerance is more your emotional risk. That’s where you get all those questions as far as, are you conservative, moderate, or aggressive, but your risk tolerance might not really line up with your actual retirement portfolio. It might actually line up with how your retirement portfolio should be. The reason why is because of the two other risks. The other two risks are, risk required and your risk capacity. Now your risk required is how much risk do you need to take to maintain your lifestyle in your retirement? So if you don’t need to take a lot of risk in your retirement to maintain lifestyle, then why are you taking too much risk just to try to get to the home run. So for example, let’s say you have a million dollars in your portfolio, if your million dollars goes to a million and a half is your lifestyle going to change that much? Probably not, but what if your portfolio goes down from a million dollars to five hundred thousand dollars? Now is your lifestyle going to change? More than likely. So that’s why you need to understand what your risk required is, so if you don’t need to have a lot of risk in retirement, why should you take it? You’ve already done well saving, you don’t need to take a lot of risk to lose it. The other risk is the risk capacity. Now your risk capacity is how much can you lose and still maintain your lifestyle? So for example, if your portfolio did go from a million dollars down to a half a million dollars, you can still maintain your lifestyle, well than your risk capacity is $500,000. You can lose up to $500,000 and still maintain your lifestyle. However, if it goes, if it can’t go down that far then we need to increase what your risk, or decrease what your risk capacity is. So that way when you sign up for your retirement portfolio, we make sure that you can still maintain your lifestyle in retirement. Now all three risks are very important but we have to keep in mind that the risk tolerance is just an emotional risk. The other two risks are actually more important when it comes to your retirement. So you need to actually set it up that way. So instead of just answering questions, as far as your risk tolerance goes, what you have to do to figure out your risk required and your risk capacity is actually put a plan together and figure out if you have too much risk in your retirement portfolio or if you are going to be fine with the retirement. One way we do that is through a retirement plan, and the retirement plan looks at multiple different ways as far as risk. What we do is a  simulation and that can determine different ways of getting the same average returns but also determine for us whether or not you’ll make it through retirement without running out of money. So you can do your own Monte Carlo simulation, yourself back at home. There’s many different plan software programs that you can use or if you want to set some time up with us we’re more than happy to set that time up with you and create your own retirement plan and make sure that you can look at what your risk required and your risk capacity is. So until then, we look forward to providing another video and we look forward to you watching the next one. So again, thank you.

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