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Lessons Learned

Finding Clarity in the Risk Management Picture

The realities of a longer lifespan, less-than-double-digit returns and shrinking retirement nest eggs are sinking in. Even people who thought they were making all the right moves with their investments are wondering: Am I getting it right?

As Americans look back at the financial challenges they have endured over the past few years, they recognize they need a clearer picture of their true risks. A few solid lessons are guiding their new priorities and attitudes.

Lesson 1: Conservative Posture Prevails
Northwestern Mutual’s 2010 Financial Realities: Changing Timeframes study showed that nearly three out of four Americans favor financial strategies that are lower risk, stable and steady versus those that carry higher risk in the pursuit of aggressive growth. “People are looking at longer time horizons for accomplishing their financial goals,” says John Grogan, the company’s senior vice president for financial planning and product delivery. “It’s especially interesting that young people are saving more than older generations—so the conservative approach is not limited to people nearing retirement.”

Lesson 2: Heightened Awareness of Risks
“We have seen a shift in mind-set that encompasses strategies for distributing wealth,” says Grogan. “It’s not just about accumulating wealth but planning how to get through retirement. People are assessing the risk of outliving their assets. A knowledgeable financial advisor can help individuals consider their specific risks, including the potential impact of a long-term care event, as well as the effects of taxes and inflation on the assets they are counting on to fund their retirement.”

Lesson 3: An Investment Portfolio Is Not Enough
Not all risks can be adequately addressed in an investment portfolio alone. While people have different appetites for risk, permanent life insurance may be appropriate in light of upheaval in the equity markets, Grogan notes. “Consumers understand that financial security means not just growing and managing your assets, it means growing, managing and protecting your assets.”

Lesson 4: Consider Lifespan in Your Plan
With the Centers for Disease Control’s recent announcement that American life expectancy continues to increase, a proactive approach becomes even more essential. “Getting through retirement means getting smarter about our finances,” says Rebekah Barsch, Northwestern Mutual director of retirement markets. “A comprehensive plan that combines the efficiencies of insurance and investments can help you optimize your income and maintain your desired lifestyle, no matter how long you live. And since women can expect to live longer than men, it’s imperative for them to have a plan in place.”

“Northwestern Mutual” is the marketing name for The Northwestern Mutual Life Insurance Company (NM), Milwaukee, WI (life insurance, disability insurance, and annuities), and its subsidiaries. Securities offered through Northwestern Mutual Investment Services, LLC (NMIS), a subsidiary of NM, broker-dealer, registered investment adviser, member FINRA and SIPC.