Peter Drake, vice president of retirement and economic research at Fidelity Investments Canada, spoke of five retirement risks in a speech Monday at the Canadian Institute of Financial Planners’ annual conference in Ottawa.

Speaking of “new retirement realities,” Drake said there are five serious retirement risks that people now face: Longevity Risk, Inflation Risk, Asset Allocation Risk, Withdrawal Rate Risk and Healthcare Risk.

“Financial advisers and investors will need to work closer than ever before to identify the level of risk that is acceptable to the individual investor, while managing the sometimes conflicting goals of adequate pre-retirement income replacement, capital preservation and long-term growth,” Drake said. “A retirement income plan that addresses the five key risks to retirement income can considerably improve the financial well-being of Canadians in retirement.”

There is a 50% chance that a at least one member of a 65-year-old couple will live to age 90 and a 25% chance one will reach age 94. “As active, healthy lifestyles and medical advances continue to extend life expectancy, Canadians will have to consider how early they can afford to retire and plan for the real possibility that they’ll need 25 to 30 years of post-retirement income,” Drake said.

The government fiscal and monetary stimulus used to fight the global financial crisis is likely to result in inflation. “While high inflation, such as that experienced in the 1970s, is unlikely, even a modest 2% inflation over the span of a 25-year retirement can erode a retiree’s purchasing power by 40%,” Drake said. “Retirees need investment portfolios capable of keeping up with inflation.”

Investors have become risk-averse ever since the 2008-2009 crisis but need a well-diversified portfolio that includes stocks, bonds and cash to provide growth as well as protection against market volatility,” Drake said.

And investors must be very conservative about the rate at which they withdraw money from their portfolios, said Drake, who recommends annual withdrawal rates of no more than 4% to 5%.

Drake also pointed to the findings of the 2010 Fidelity Retirement Survey, which found that 39% of retirees believe healthcare costs could deplete their savings and lower their standard of living. “Canadians need to understand what is and isn’t covered by government healthcare plans, what their potential needs may be and plan accordingly for out-of-pocket age-related expenses,” he said.

“There is no doubt the global financial crisis and the economic recession of 2008/2009 caused by financial and emotional distress for Canadian investors—older Canadians in particular,” Drake added. “But it hasn’t changed the risks to retirement income, which all Canadians need to consider. Rather, it highlighted the need for greater individual risk assessment and the need for a written retirement income plan that incorporates strategies to mitigate the five key risks to retirement income.”