Retirees: You’re thinking about risk all wrong

Odds are high that retirees are thinking about risk in exactly the wrong way.

Of course, chances are good that the rest of us are, too. But risk is especially toxic to retirees’ portfolios, since they have a reduced ability to make up for any unexpected losses — either by going back to work or waiting for the markets to recover from those losses.

Consider the range of possible outcomes from just three current geopolitical crises (out of the myriad that could also be chosen): Those involving Italy’s political and economic collapse, a nuclear-bomb-armed North Korea, and a possible trade war. How confident are you that each of these crises will be resolved favorably? And even if those crises don’t cause the financial markets to implode in the near term, how confident are you that decisions being made today won’t have dreadful consequences over the long term?

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