Battle the Big 4 Retirement Risks With a Solid Income Plan
Putting your money in the right places and being smart about how you'll draw it down are the keys to defeating the top four retirement foes: taxes, inflation, stock downturns and legacy pitfalls.


If you thought saving for retirement was tough, wait until you see what’s next for your nest egg.
The reality is that pile of money you accumulated won’t do you much good unless you can turn it into income that will last 20 years or more. And that means keeping a watchful eye out for all kinds of risks in retirement.
Having an income plan in place can help you battle the Big 4:

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
1. Tax risk
Of course, your goal is to keep as much of your money as possible. But if you’ve been socking away savings in a tax-deferred retirement plan (such as an IRA, 401(k), 403(b), etc.), you have a silent partner in Uncle Sam. Withdrawals from those accounts — whether you take them in your 60s or when they’re required starting at age 70½ — will be taxed as ordinary income. It’s critical to have strategies built into your plan to keep the damage to a minimum. Talk to a financial adviser and/or tax professional about how you can manage your tax bracket each year — filling up the lowest bracket possible without spilling into the next. And keep an eye on how your deductions and exemptions may change once you retire — if you pay off your house, for example, or if you no longer own a business.
2. Inflation risk
Taxes take a bite out of your nest egg; inflation slowly erodes it. If you live on $5,000 a month right now, by 2027, you’ll likely need a little more than $6,700 a month to maintain the same lifestyle (based on a 3% rate of inflation). You can’t necessarily count on getting the same cost of living adjustments (COLAs) that you got when you were employed. Some pensions offer them, but many do not. And Social Security’s COLAs are unpredictable. To hold onto your purchasing power over the decades, you’ll have to build some inflation protection into your plan. Long-term, stocks may be your best inflation fighter — but they come with their own risks. Consult with your financial professional to discuss your specific needs and options.
3. Investment risk
A market downturn can devastate your nest egg — especially if you’re close to retiring or recently retired. It’s important to position your savings in a way that ensures you have sustainable, reliable income every month. The easiest way to think about it is as though your money is in different buckets.
- The first bucket is the money you’ll spend down through the first five years of your retirement. It should be filled with cash and safer investments. They may earn only 2% or 3%, but in the worst downturn, they shouldn’t lose more than 1%.
- The next bucket is for years six through 10. This money can be a bit more growth-oriented, but as you get closer to using it, you should become more conservative with how it’s invested … like bucket No. 1.
- The third bucket is for money you won’t need to touch for 11 or more years. Eventually, you’ll use it for income, but it can be invested more aggressively than the money in the first and second buckets, because if there’s a loss, you’ll have time to recover.
4. Estate and legacy risk
Your plan also should extend to the loved ones who will inherit your money. Proper positioning will help you leave a legacy without passing on any estate-planning snafus or excessive taxes to those who receive it. Talk to your adviser about how this applies to your retirement accounts, and if you should be looking at life insurance and other alternatives.
Your income plan is arguably the most important part of your comprehensive retirement plan. It will help you figure out what you need and where that money will come from. And when you reach retirement, it will help preserve the money you’ve worked so hard to save.
Kim Franke-Folstad contributed to this article.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Don Ross, founder and president at Ross Wealth Advisors, has more than 25 years' experience in the insurance and financial services industry. He has passed the Series 7 securities exam and holds a life insurance license in Ohio. Retired from the military after more than 20 years of service as a pilot in the Ohio National Guard, Ross lives in Upper Arlington, Ohio, and enjoys traveling, yard work and cycling. He and his wife, Joni, have three children: Judith, Ryan and Lance.
-
Aging: The Overlooked Risk Factor
Sponsored Elder care is a personal and financial vulnerability many people fail to plan for.
-
AI vs the Stock Market: How Did Alphabet, Nike and Industrial Stocks Perform in June?
AI is a new tool to help investors analyze data, but can it beat the stock market? Here's how a chatbot's stock picks fared in June.
-
Eight Tips From a Financial Caddie: How to Keep Your Retirement on the Fairway
Think of your financial adviser as a golf caddie — giving you the advice you need to nail the retirement course, avoiding financial bunkers and bogeys.
-
Just Sold Your Business? Avoid These Five Hasty Moves
If you've exited your business, financial advice is likely to be flooding in from all quarters. But wait until the dust settles before making any big moves.
-
You Were Planning to Retire This Year: Should You Go Ahead?
If the economic climate is making you doubt whether you should retire this year, these three questions will help you make up your mind.
-
Are You Owed Money Thanks to the SSFA? You Might Need to Do Something to Get It
The Social Security Fairness Act removed restrictions on benefits for people with government pensions. If you're one of them, don't leave money on the table. Here's how you can be proactive in claiming what you're due.
-
From Wills to Wishes: An Expert Guide to Your Estate Planning Playbook
Consider supplementing your traditional legal documents with this essential road map to guide your loved ones through the emotional and logistical details that will follow your loss.
-
Your Home + Your IRA = Your Long-Term Care Solution
If you're worried that long-term care costs will drain your retirement savings, consider a personalized retirement plan that could solve your problem.
-
I'm a Financial Planner: Retirees Should Never Do These Four Things in a Recession
Recessions are scary business, especially for retirees. They can scare even the most prepared folks into making bad moves — like these.
-
A Retirement Planner's Advice for Taking the Guesswork Out of Income Planning
Once you've saved for retirement, you'll need your nest egg to support you for as many as 30 years. For that, you need a clear income strategy, not guesswork.