5 Real Retirement Risks

The Five Real Retirement Risks- longevity, inflation, taxes, healthcare, and market volatility- can significantly impact your financial future.

Failing to address retirement risks can lead to financial insecurity, stress, and even forced lifestyle changes. Here’s what can happen if you don’t take action against these five major retirement threats

Longevity Risk – Will Your Money Last?

The good news: Americans are living longer than ever.
The bad news: Many retirees outlive their savings due to longer life expectancy.

With pensions becoming rare (just above 30% of retirees receive one according to the Pension Rights Center), retirees must strategically manage their income to ensure financial security for 20–30 years or more. According to the Society of Actuaries, a couple retiring at 65 has a 50% chance that one spouse will live to age 93.

Solution: Work with a fiduciary financial advisor to create a sustainable withdrawal strategy that prevents your savings from depleting too soon.

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Inflation Risk – Rising Costs Can Erode Your Savings

Inflation has hit retirees hard in recent years. In 2022, inflation peaked at 9%, a 40-year high (U.S. Bureau of Labor Statistics). This means your retirement savings might not stretch as far as you expected.

💡 Think about grocery prices, gas, and healthcare—what you could afford 10 years ago now costs significantly more.

Solution:

• Talk to your financial advisor about your options for inflation-protected assets and if that makes sense for you.
• Review your income strategy to ensure it keeps pace with inflation.

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Tax Risk – Future Tax Hikes Could Shrink Your Retirement Income

With the Tax Cuts and Jobs Act expiring in 2025, tax rates are expected to increase, meaning retirees will need to adjust their strategies.

🔹 Key concerns:

• Higher tax rates could eat into your retirement withdrawals
• Social Security benefits may become taxable based on your total income
• Required Minimum Distributions (RMDs) could push you into a higher tax bracket

Solution:
✅ Talk to your financial advisor about your options for converting traditional 401(k) or IRA funds into a Roth IRA to lock in today’s lower tax rates
✅ Diversify income sources between tax-free and taxable accounts if that best fits your retirement strategy. 
✅ Work with a retirement tax strategist to reduce your lifetime tax burden

📌 Stay updated on tax changes at IRS.gov.

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Healthcare & Long-Term Care Costs – A Six-Figure Retirement Expense

According to Fidelity Investments, the average retired couple at age 65 needs $320,000 after taxes for healthcare expenses alone. That number excludes long-term care costs, which can exceed $100,000 per year.

💡 70% of retirees will need some form of long-term care, yet most have no plan to pay for it. (CNBC.com)

Solution:
✔ Consider long-term care insurance (LTCI) or opther potential options like hybrid life insurance policies
✔ Open a Health Savings Account (HSA) for tax-free medical expenses
✔ Work with a financial planner to estimate future healthcare costs

📌 Read more on long-term care at AARP.org.

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Stock Market Risk – How Volatility Affects Retirement Income

The stock market is unpredictable. While 2024 delivered strong returns, market downturns can quickly erase years of savings if you’re not properly allocated.

🔹 Retirees must balance growth with stability. Too much risk? You could lose money in a downturn. Too little risk? Inflation eats away at your purchasing power.

Solution: Talk to your financial advisor about considering the below options if they make sense with your retirement and financial strategy:
✅ Diversifying your portfolio
✅ Discuss all your investment options at your appropriater risk tolerance
✅ Work with an investment advisor to manage risk and optimize returns

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Key Learnings: Five Real Retirement Risks

• The 5 biggest financial risks retirees must plan for
• Why longevity risk is a growing concern and how to make your money last
• How to mitigate inflation’s impact on your retirement income
• The tax risks retirees face in 2025 and beyond – and how to prepare
• Strategies to plan for rising healthcare and long-term care costs
• How to reduce exposure to stock market volatility while maintaining growth
• The importance of building a Risk Survival Toolkit to stay financially secure

 

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Check out these free financial planning resources to help you manage youre retirement risks:

Beacon Retirement Strategies Radio Show:

• Money Myths and Surprising Truths
• Are You Missing Out On Tax-Free Money?
• Key Steps To Take If You Plan to Retire In The Next 10 Years
• The Most Popular Retirement Questions
• Annuities: The Good, Bad, Ugly and Unknown
• Five Essential Pillars of Financial Planning

Retirement Talk YouTube Show:

• Top Questions to Ask Your Financial Advisor Now
•  Medicare Enrollment Questions to Ask Before Turning 65
• Current Tax Cuts that Expire After 2025
• Why You Need a Second Opinion on Your Investment Plan

 

Beacon Capital Management Article:

• What is a Good Monthly Retirement Income?
• How Long Will My Retirement Savings Last?
• How to Reduce Taxes in Retirement

 

Free Retirement Savings Calculator:

• Retirement Savings Calculator