What Are the Biggest Risks to a Successful Retirement?
A retirement plan involves more than investments alone.
Let's talk
about how the different pieces of your retirement plan can work together.
Key Takeaways:
- Reaching retirement with a big balance isn't the same as being safe. Once the paychecks stop, a whole set of risks, markets, inflation, taxes, health, and longevity, can start pulling at how much you get to spend and how long it lasts.
- Some risks hit fast, others build slowly. A market crash right after you retire and decades of slow inflation can each do serious damage, in completely different ways.
- The fix isn't predicting the future; it's building a plan flexible enough that no single problem knocks the whole thing over. You can't control markets, prices, taxes, or your health, but you can control how much margin your plan leaves for surprises.
What Are the Biggest Risks to a Successful Retirement?
By 2030, every baby boomer will be at least 65, putting about 1 in 5 Americans at retirement age.1Once the paychecks stop, your savings get exposed to a whole lineup of risks that shape how much you can spend and how long it lasts.
Some of those risks will come fast, and others will build so slowly you barely notice, like inflation chipping away year after year. The good news: You don’t have to predict these risks to prepare for them. Understanding where your plan may be vulnerable and maintaining flexibility can help you respond when circumstances change. You mainly need to know where your plan is exposed, and leave enough flexibility that no single surprise can topple the whole thing.
Here are some of the biggest risks to a successful retirement, along with planning considerations that may help you prepare for them.
1. Carrying Too Much (or Too Little) Investment Risk
When you’re working and saving, you can ride out a market drop and even buy more on sale. In retirement, that flips, because now you’re pulling money out while the market is down, and that changes how much risk makes sense for you.
Think back to 2008, when the S&P 500 lost about 37% in a single year.2Someone still working could keep contributing and wait for the rebound, which came. A retiree who needed to sell investments during that downturn to fund living expenses could have realized losses and reduced the amount of capital available to participate in a subsequent recovery.
The lesson isn’t to hide from stocks, because playing it too safe is its own risk: a pile of cash won’t grow enough to outrun 30 years of rising costs. The sweet spot is a mix built around your actual withdrawals and timeline, with enough steady, accessible money to avoid a fire sale in a bad year, and enough growth to keep you ahead for the long haul.
2. Overlooking Sequence-of-Returns Risk
While you’re still working, the order in which your investment returns show up barely matters. You’re not touching the money, so a bad year followed by a good year lands you in the same spot as the reverse. Once you retire and start pulling money out every month, though, the order suddenly matters a lot.
Picture retiring with $1 million, only to have the market drop 30% in your very first year. You’re down to $700,000, and you’re also selling investments to pay your bills, so you’re drawing from an account that just shrank. A significant decline early in retirement can have a greater effect on portfolio sustainability than the same decline occurring later, particularly when withdrawals are being made during the downturn. Same average return over the long haul, wildly different outcomes, all because of when the bad year landed.
You can’t control the market’s timing, but you can cushion it:
- Withdrawals are what turn a temporary dip into permanent damage. When you sell investments after they've dropped to cover your spending, those shares are gone, so they can't rebound when the market recovers.
- Keeping a cushion of cash and steadier investments for your near-term spending means you don't have to sell stocks into a downturn just to pay the bills.
- A little flexibility helps too. Trimming discretionary spending during a bad early stretch takes pressure off the portfolio.
3. Underestimating How Long Retirement Lasts
A 65-year-old today can expect to live into their mid-80s on average, and about 1 in 4 will make it past 90.3 Plan only to age 85, and you could come up a decade short. If you retire in your early 60s, your savings may need to cover 30 years or more, which is a long time for inflation, markets, and healthcare costs to swing.
If you’re married, odds are high that at least one of you lives well into your 90s, and whoever is left may have to run the whole plan, and the whole household budget, alone. A good plan makes sure the surviving spouse isn’t left short.
4. Underestimating Inflation Over Time
Over the long run, prices have risen around 3% a year on average, which doesn’t sound like much until you compound it: at 3%, the cost of living roughly doubles about every 24 years. That slow burn is brutal for anyone leaning on fixed payments. If a chunk of your income, a pension or an annuity, doesn’t rise with inflation, it buys less and less every year. Thirty years in, that “steady” check might cover half of what it does today.
It’s also why projecting today’s budget straight across 30 years understates what you’ll actually need. Housing, food, travel, and especially healthcare all tend to climb faster than you would guess.
So even in retirement, some of your money still needs to grow, at least the portion earmarked for your later years, just to keep pace with rising prices.
5. Failing to Plan for Taxes in Retirement
A lot of people assume taxes shrink once the paychecks stop. Sometimes they do, but a big chunk of most people’s savings has never been taxed yet, and the government wants its cut eventually. How you handle that can swing your after-tax income by thousands of dollars a year. A few tax traps are worth watching:
- Tax-deferred balances: Every dollar in a traditional IRA or 401(k) is money you haven't paid taxes on yet. When you withdraw it, it's taxed as ordinary income, so a seven-figure balance can mean a much bigger tax bill than you're expecting.
- Withdrawal order: Pulling from a taxable brokerage account, a traditional IRA, and a Roth account each hits your taxes differently, and the order you tap them can meaningfully change what you owe. It's worth mapping out tax-efficient withdrawal strategies before you start drawing income.
- Required minimum distributions: Once you hit 73 (the current starting age), the IRS makes you start withdrawing from your pre-tax accounts whether you need the money or not.4 Let those balances grow too large and the forced withdrawals can push you into a higher bracket, right when you'd rather have control.
- Capital gains: Selling appreciated investments to spend, rebalance, or diversify can trigger capital gains taxes, so those sales need to be coordinated with the rest of your income.
- Social Security taxation: Depending on your other income, up to 85% of your Social Security benefits can be taxable.5 Big withdrawals or gains in the same year can drag more of your benefit into taxable territory.
- Medicare surcharges (IRMAA): Here's a sneaky one. A high-income year, from a big withdrawal, a Roth conversion, or realized gains, can raise your Medicare Part B and Part D premiums about two years later, since those premiums are based on your income from two years prior.6
The threat here isn’t taxes themselves. It’s failing to coordinate them, and handing over more than you needed to.
6. Underestimating Healthcare Costs
At the time of this writing, one research group estimates that an average 65-year-old couple may need around $405,000 saved just to have a 90% chance of covering their healthcare costs in retirement, and that’s before any long-term care.7 Here’s where the money goes:
- Pre-Medicare coverage: Retire before 65 and you're on the hook for your own health insurance until Medicare kicks in. Marketplace coverage, COBRA, or a spouse's plan can bridge the gap, but costs can vary significantly based on the type of coverage, household circumstances, available subsidies, and location.
- Medicare premiums: Medicare isn't free. Most people pay a monthly Part B premium (about $203 a month at the time of this writing), plus premiums for drug coverage and any supplemental plan.8
- Deductibles and cost-sharing: Even with solid coverage, deductibles, copays, and coinsurance keep coming, so there's still meaningful money coming out of your pocket.
- Prescriptions: Medication costs can be a big, moving piece of the puzzle, depending on what you're prescribed and how your plan covers it.
- Dental, vision, and hearing: Traditional Medicare barely touches these, so glasses, hearing aids, and dental work often come straight out of pocket. Budget for them separately.
- Rising needs with age: Even setting aside any major health event, people simply use more healthcare as they get older, so it's smart to expect this line item to grow over time.
7. Not Planning for Long-Term Care
According to the federal government, someone turning 65 today has almost a 70% chance of needing some kind of long-term care in their remaining years.9 Long-term care is different from regular healthcare, it’s help with everyday activities like bathing, dressing, and eating, whether at home, in assisted living, or in a nursing home.
And regular health insurance and Medicare mostly don’t cover it. The costs can be staggering, running well into six figures a year for nursing care, and they vary a lot depending on the type of care, how long it’s needed, and whether one or both spouses end up needing it. About 1 in 5 people who turn 65 will need care for longer than five years.9
That kind of extended-care event can force large withdrawals late in retirement, draining assets that were supposed to support a surviving spouse or be passed on to family. It’s often the single biggest wildcard in a retirement plan.
There’s no one right answer. Some people plan to self-fund it from savings, some buy long-term care insurance, and plenty do a mix of both. The key is to decide on purpose, rather than hoping it never comes up.
8. Not Preparing for Cognitive Decline
This is the risk nobody wants to talk about, but ignoring it can undo decades of careful planning. About 1 in 9 Americans age 65 and older is living with Alzheimer’s, and that’s before counting other forms of cognitive decline.10 As judgment slips, so does the ability to manage money safely, and scammers know it: older adults reported losing $2.4 billion to fraud in 2024 alone.11
A few steps now can protect you and your family later:
- Put powers of attorney and other decision-making documents in place while you're fully able to choose who you trust. Waiting until there's a problem is often too late.
- Name trusted contacts, and decide in advance who should step in if someone notices unusual financial behavior or slipping judgment.
- Simplify while you can. A tangle of accounts across a dozen institutions is hard for anyone to take over quickly, so consolidating now makes a future handoff far smoother.
- Get your financial life organized and written down, what you own, where it is, and who to call, so a spouse or adult child can actually pick up the reins when they need to.
Biggest Risks in Retirement FAQs
1. What is the biggest mistake most people make regarding retirement?
Treating the day they retire as the finish line. Reaching a savings number is only half the job. The bigger challenge is turning that money into income that survives markets, inflation, taxes, healthcare, and a retirement that could last 30 years.
2. What is the most overlooked threat to retirement?
Sequence-of-returns risk is a strong contender, because a rough market in your first few years of retirement can do outsized, lasting damage. Long-term care and cognitive decline get overlooked too, mostly because they’re uncomfortable to think about.
3. Can I lose all my 401(k) if the market crashes?
It’s extremely unlikely with a diversified mix. A broad crash hits hard but recovers over time, and you’re usually not all-in on one thing. The bigger danger is being forced to sell a lot while the market is down, which is what a cash cushion and sequence planning are meant to prevent.
4. Is taking too little investment risk dangerous in retirement?
Yes. Playing it too safe feels comfortable, but over a 30-year retirement, too little growth can leave you short as inflation raises your costs. The goal is the right amount of risk for your situation, which is rarely zero.
5. Which retirement risks are the hardest to predict?
The personal ones: how long you’ll live, whether you’ll need long-term care, and whether your health or memory will change. You can’t know your own numbers in advance, which is why planning for a range of outcomes beats betting on the averages.
6. How often should you review the risks in your retirement plan?
At least once a year, and after any big change, a market swing, a health event, a tax law update, or a shift in your spending. Retirement risks keep moving, so your plan should get a regular check-up.
How Our Team Helps Manage Retirement Risks
No plan can prevent every market drop, price spike, health scare, or tax change, and anyone who promises otherwise is selling something. What good planning does is show you where your plan is exposed and build in enough flexibility to absorb the hits and keep going.
Our team can stress-test the whole picture, your investments, withdrawals, longevity assumptions, inflation, taxes, and healthcare costs, to find the spots where your strategy might buckle under pressure. Because it’s a lot easier to shore up a weak point before it’s tested than after.
From there, we can pull your investment strategy, retirement income, tax planning, healthcare and long-term care, and later-life protection into one plan that flexes as life changes. If you’d like a clear-eyed look at where your own retirement might be exposed, schedule a complimentary retirement review with our team.
Resources:
1) U.S. Census Bureau: By 2030, All Baby Boomers Will Be Age 65 or Older
2) S&P 500 Total Returns by Year
3) Social Security Administration: Period Life Table
4) >IRS: Required Minimum Distributions
5) Social Security Administration: Income Taxes and Your Social Security Benefit
6) Medicare: Monthly Income-Related Adjustment Amounts (IRMAA)/a>
7) EBRI: Projected Savings Medicare Beneficiaries Need for Health Expenses
8) Centers for Medicare & Medicaid Services: 2026 Medicare Parts A & B Premiums and Deductibles
9) Administration for Community Living: How Much Care Will You Need?
10) Alzheimer’s Association: Facts and Figures
11) Federal Trade Commission: Protecting Older Consumers
Disclaimer:
Goldstone Financial Group, LLC (“GFG”) is a registered investment advisor with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or qualification. This material is provided for informational purposes only. Opinions expressed herein are solely those of GFG. None of the information presented in this material is intended to offer personalized investment advice and does not constitute an offer to sell or solicit any offer to buy a security or any insurance product and is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation.
Any references to protection benefits or steady and reliable income streams refer only to fixed insurance products. They do not refer, in any way, to securities or investment advisory products. Annuity guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. Annuities are insurance products that may be subject to fees, surrender charges and holding periods which vary by insurance company. Annuities are not FDIC insured.