On April 27, 2022

Retirement risks

By Kevin Theissen

Foundationally, what most people want is to maintain their standard of living now and into the future. This is especially true in retirement which could last several decades for many. While there are multiple potential risks and every situation is unique, the most common concerns include stock market downturns, outliving one’s money, inflation, and long-term medical expenses. These are valid concerns, but all can be prepared for with proper planning.

Investing in the stock market is a great way to build long-term wealth. You should also expect and plan for inevitable downturns. When these downturns, corrections or bear markets happen in retirement, they can be painful because you have less time to make back what we lose in a downturn. The best way to protect your investment accounts is to make sure you have a diverse asset allocation that matches your risk tolerance. As downturns happen, you can look to rebalance and even buy in with a long-term focus. Also, if you keep a year or two of living expenses in cash, you won’t have to sell out during down market conditions.

As life expectancies continue to increase, your retirement years might last three or four decades. It has been said that the child has already been born that will live to 150 years old. The risk that comes from living a long life could require saving more and holding more in stocks for long-term growth to fight inflation in these additional years. You should consider filing for Social Security benefits at least at full retirement age or even delaying age to 70. You should also be focused on keeping a manageable budget and reducing expenses. Be careful of brokered financial products like “guaranteed” annuities and reverse mortgages – as these are often sold to people that don’t always know what they are getting into.

The silent killer of inflation is often overlooked but can have a significant impact. Consider: A 3% rate of inflation will cut your purchasing power by 26% after 10 years and 45% after 20 years. Put another way, with 3% annual inflation, $500,000 will have the purchasing power of about $280,000 in 20 years—or even less if inflation is higher. This is most important for those on a fixed income. So you need to keep at least a year’s worth of expenses safe and available but also need enough in stocks to fight inflation over the long-term.

Medical and long-term care expenses are potentially one of your largest expenses in retirement and the cost has increased even more than the rate of inflation. The average cost of a nursing home is approximately $100,000 and home care averages around $50,000 per year. So it’s obvious to make sure you have good health insurance and to plan for long-term care whether or not that includes long-term care insurance.

To maintain our standard of living now and through our retirement years — it just takes some planning to maximize what we have and avoid the major risks.

Kevin Theissen is the owner and principal of HWC Financial in Ludlow.

Do you want to submit feedback to the editor?

Send Us An Email!

Related Posts

Rhythms of return

March 26, 2025
Like Nature, nothing in astrology is linear. Much like life, really. The process of change rarely happens in a straight line. It’s messy. It’s one step forward and two steps back. Sometimes, it’s two steps forward with just one step back. Sometimes, these circular rhythms are frustrating. Just like how it was to be age…

‘Watchmen #1’ – A comic that took me 35 years to appreciate 

March 26, 2025
I’ve owned “Watchmen #1” since the day it came out, or close to its release date in September of ’86. It’s spent most of its life bagged but not boarded. The spine is still crisp, as are the edges. It lies relatively flat, and the color seems good. Maybe slightly dimmer. I think I’ve been…

Ski slower, love longer

March 26, 2025
Hello readers! I’m Uncle Matty, here for your help, but please be advised to swim at your own risk. I am not a doctor, therapist, lawyer, or man of the cloth. My professional certifications are limited to slinging cocktails and umpiring.  If you have serious medical, financial, legal, or faith-based questions, please seek more appropriate…

Killington’s summit: Where the mountain whispers back

March 26, 2025
I had ridden bikes all day with a couple of friends. In my memory, it was one of my friend’s birthdays, and we were working on her goal of being able to ride Yo Vinny. Not without putting a foot down because that section of ladder around the big rock would always be tight.  But…