Income Risk Orientation
Income Risk Orientation
Rate yourself on each of the 10 scales below to discover where your retirement income preferences fall on the spectrum — from Safety-First to Probability-Based.
Safety-first thinkers are more concerned with security over growth. They tend to focus on the unacceptable consequences of failure in retirement and look to minimize its probability. This type of investor would gladly trade off some degree of market upside in exchange for greater security in their retirement income.
Safety-First investors agree with the following as priorities:
- Eliminating or reducing the possibility of failure through hedges or insurance
- Sacrificing risk-adjusted returns for durability of income
- Enhancing retirement lifestyle through meeting personal goals
- Securing steady income has priority over leaving a larger inheritance
Safety-first individuals are less tolerant of market extremes and tend to internalize market stress. They want to avoid jeopardizing their essential expenses and are happy to make trade-offs in exchange for more security. They tend to be more open-minded about investments that can reduce market volatility or insure against poor market outcomes.
Probability-based thinkers see the odds working in their favor over the long run. They tend to focus on the likelihood of success and believe they can make appropriate adjustments if markets experience downside extremes. They are likely to tolerate market pullbacks while exhibiting faith that markets will recover and move higher.
Probability-Based investors agree with the following as priorities:
- Maximizing risk-adjusted returns
- Growing their nest egg to the fullest level possible
- Enhancing their retirement lifestyle by achieving higher market returns
- Maximizing the amount they leave to heirs
Probability-based people tend to be highly rational, fluent in numeracy, and even-tempered. They are likely to allow a diversified portfolio to carry the weight of generating sufficient growth to support retirement income. To them, buffering against risk with insurance or hedging adds unnecessary cost and drags down total returns.
Safety-First
- Prioritizes reducing risk of failure
- Seeks secure income for essential expenses
- Willing to trade-off growth for security
- Open to hedges and insurance products
- Less tolerant of market volatility
Probability-Based
- Focuses on maximizing long-term growth
- Comfortable riding through market volatility
- Prioritizes growing wealth and leaving a legacy
- Relies on a diversified portfolio
- Rational and even-tempered under pressure
Individual Question Scores
Ready to discuss your results?
Your responses reveal how you think about income risk in retirement.
Share your results with info@harmanwealth.com to start the conversation.