A sound retirement income plan takes into account several financial risks, including the potential for the retiree to outlive his or her assets, the effects of inflation on future income, rising health care costs, and the uncertain future of the Social Security system. For example, inflation increases the future costs of goods and services; inflation can also erode the value of assets set aside to meet future costs if the assets earn less than the rate of inflation. In addition to these considerations, a plan should take care to avoid excessive withdrawals in the early years of retirement that could lead to premature depletion of assets. The overall objective of planning should be to create a sustainable stream of income that also has the potential to increase over time.
