Contingency Fund: Individual Retiree Risk Management


by Jason K. Branning, CFP®, RICP, and M. Ray Grubbs, Ph.D.

Feature article in the Journal of Financial Planning, December 2022

The goal of this article is to provide an actionable framework for contingency planning for individual retirees through the modern retirement theory (MRT) perspective. Contingency planning encompasses a retiree’s risk management processes, techniques, and strategies, along with a choice architecture. Our goal is to provide insights that are mitigating to those conditions within longevity that can impair or impact a retiree’s ability to remain retired.

We offer three risk categories—known, unknown, and unknowable—as an organizational scaffold that demands an intentional choice be made by the retiree. Then, to guide an individual retiree’s decisions about contingency planning, we put forth an active risk selection matrix. The 3-R matrix can be used for guiding and evaluating risk choices through risk recognition, risk reduction, and acceptance of residual risk.

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