Retirees are facing challenges not seen in other generations. People are living longer, and potentially outliving their money, they are managing their own investments, and dealing with unforeseen health and family risks. Risks are unavoidable for the most savvy or inexperienced investor. How these risks are addressed and assessed will make a big difference in future retirement goals.

A new paper, How Well Do Retirees Assess the Risks They Face in Retirement, from the Center for Retirement Research at Boston College, addresses this very question and breaks it down into a lifecycle model of a typical retired household. Five risk categories are addressed, including:

• Longevity Risk – The risk of living longer than expected and exhausting resources
• Health Risk – Retirees can face unexpected medical expenses and long-term care needs. As one ages out-of-pocket expenses rise quickly
• Market Risk – Risks such as market volatility and the housing market if the retiree has recently downsized
• Family Risk – This can include divorce or death of a spouse, and children becoming ill or unemployed
• Policy Risk – Social security is the primary income source for many retirees. The program's trust fund reserves are projected to be depleted by 2035 and people may experience a 20-25% benefit reduction after that.

The paper addresses responses to the Health and Retirement Study (HRS), a biennial longitudinal survey of a representative sample of U.S. households over age 50.