Did you have “global pandemic” on your bingo card of possible retirement risks? The reality is that risks abound, and you can’t always see them coming.
Still, a proactive stance can help you get through them — and thrive.
Here are the top risks retirees need to be aware of and how to guard against them.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free 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.
The Kiplinger Building Wealth program handpicks financial advisers and business owners from around the world to share retirement, estate planning and tax strategies to preserve and grow your wealth. These experts, who never pay for inclusion on the site, include professional wealth managers, fiduciary financial planners, CPAs and lawyers. Most of them have certifications including CFP®, ChFC®, IAR, AIF®, CDFA® and more, and their stellar records can be checked through the SEC or FINRA.
1. Outliving your savings
Americans are living longer than ever. While most would welcome increased longevity, it also means you’ll need money to fund additional years of retirement. What can you do to ensure your savings last?
- Work longer. Working just a few years longer can help you save more money, while also delaying your need to tap your nest egg.
- Part-time work. Instead of leaving work behind completely, consider taking a part-time job to bring in some income so your money can continue to grow.
- Delay Social Security. If your health is good and you have other income sources now, you can get a significantly bigger paycheck by waiting on Social Security.
- Consider an annuity. A lifetime income annuity provides you with a guaranteed source of income you can’t outlive.
2. Encountering sequence of returns risk
Your chances of running out of money are much less if you retire during a booming market and your portfolio is up. But what happens if you retire during a market decline? It’s a little-known phenomenon known as sequence of returns risk.
Making withdrawals from your portfolio when it’s down forces you to sell more investments to come up with the amount you need. Not only does that drain your portfolio faster, but it leaves you with fewer assets with which to participate in an eventual rebound.
A wealth adviser can work with you in the years leading up to retirement to create a pool of money for your immediate cash needs so you won’t need to make withdrawals if the market is down.
The chart below illustrates what can happen to a hypothetical portfolio based on different returns at different points in time.
3. Rising health and medical expenses
Health care is one of the biggest retirement expenses, but many people overlook it when planning for retirement.
Health care costs are expected to rise about 7.5% in 2025, a near-record trend that is driven by inflationary pressure, prescription drug spending and behavioral health utilization.
Looking for expert tips to grow and preserve your wealth? Sign up for Building Wealth, our free, twice-weekly newsletter.
To ensure that health care costs don’t overwhelm your retirement, pay attention to these things:
- Health savings accounts (HSAs). You can build up an account for health-related expenses by saving in tax-advantaged HSAs in the years before retirement.
- Health insurance. If you retire before age 65, you’ll need to line up health insurance coverage. Some options to consider: COBRA through your previous employer, a health exchange plan or a high-deductible plan paired with an HSA.
- Medicare. Medicare won’t cover all your health care expenses in retirement. In addition to Medicare, which covers some doctors’ visits and hospital stays, you’ll want to purchase supplemental plans to pay for out-of-pocket costs.
- Long-term care insurance. The possibility of needing long-term care is higher than you might think. Long-term care insurance can pay for care when you’re no longer able to care for yourself. The earlier you buy it, the more affordable the premiums will be.
4. Letting inflation erode your purchasing power
It may seem harmless in small doses, but over time, inflation can erode your purchasing power. Think of it as a silent thief stealing the value of your money. While Social Security has automatic cost-of-living adjustments each year, it’s up to you to make sure the rest of your money keeps up with inflation. These strategies might help:
- Invest for growth. Over time, stocks have shown the ability to outpace inflation. Even in retirement, it’s important to keep some of your portfolio invested in stocks.
- Inflation-proof your investments. Consider inflation in the context of your investment selection and work with your financial adviser to adjust based on your situation.
- Explore annuities. Some annuities come with payments that increase with inflation, providing a steady income stream that retains its purchasing power over time.
Retirement is an exciting chapter in life, offering countless opportunities for personal fulfillment and quality time with loved ones.
However, concerns about financial security can create anxiety and keep you up at night.
The good news is that with a little bit of planning, you can pave the way for a smooth transition into retirement.
Related Content
- Phased Retirement: Why Easing Into Retirement Might Be Your Best Move
- Delay Social Security Benefits — Even by a Month — to Boost Your Check
- Average Cost of Health Care by Age
- How to Help Shield Your Retirement From Inflation
- Three Essential Estate Planning Steps to Protect Your Nest Egg
-
Your Medicare Costs Are Set to Soar: What to Expect Over the Next DecadeMedicare beneficiaries will face higher premiums, deductibles and surcharges starting in 2026 and continuing over the next decade. Here's what you need to know.
-
How Different Generations Invest and What They Can Teach YouBoomers, Gen Xers, millennials and Gen Zers are taking varying approaches to investing. Here's what they're doing and key lessons you can learn from them.
-
How Different Generations Invest and What They Can Teach You
Boomers, Gen Xers, millennials and Gen Zers are taking varying approaches to investing. Here's what they're doing and key lessons you can learn from them.
-
What One Widow's Ordeal Teaches Us About Marriage and MoneyA man charmed a 72-year-old widow into marriage, and then her accounts were seized to pay off his debts, highlighting the importance of background checks on potential spouses as well as prenuptial agreements.
-
Are You Getting a Gray Divorce? These Six Financial Strategies Come From a Financial PlannerManaging an equitable division of assets, selling a home, negotiating alimony and splitting retirement accounts are among the money matters that weigh as heavily as emotional issues.
-
Stocks Climb as Apple, Nvidia Soar: Stock Market TodayOracle joined in on the fun, too, after the software giant announced a C-suite shake-up.
-
How to Navigate Your Finances After Losing Your Spouse: Thoughts From a Financial PlannerIt's important you get involved in financial planning now so you're prepared and confident to make decisions when you potentially become your own financial manager.
-
The Tax Trap Snares Many Business Owners: A Financial Pro's Guide to 11 Strategies You May Be MissingPoor tax planning means many business owners are leaving money on the table for the IRS. This detailed guide from a financial adviser highlights strategies you may not be aware of.
-
I'm 63 With an Aging House That Needs Repairs, but I Might Move to a Retirement Community In a Few Years. Is It Worth Making Those Fixes?We ask financial experts for advice.
-
The 'Ted Lasso' Effect: A Positive Outlook Really Can Strengthen Your Retirement PlanOptimism like that of the fictional soccer coach can surprisingly improve your retirement planning by encouraging better saving habits and a more positive outlook on your financial future.
