Risks that Ruin your Retirement

Retirement Risks: What Investors Need to Know Before Retiring

Planning for retirement involves more than simply saving money. While most investors understand stock market risk, there are several other significant threats that can derail even the most carefully planned retirement strategy. Understanding these retirement risks—and planning for them early—can help protect your long-term financial security.

Below are three of the most common and impactful risks retirees face today: unexpected health-care needs, portfolio failure, and unexpected family or financial responsibilities.

1. Unexpected Health-Care Needs and Rising Medical Costs

One of the greatest risks to a secure retirement is the potential for escalating health-care expenses. Many retirees underestimate how much they will spend on medical needs, especially as people are living longer than ever.

Key Considerations:

• Rising health-care costs: Inflation and increasing medical expenses can make insurance premiums and out-of-pocket costs a significant portion of retirement spending.

• Long-term care needs: A disabling illness or injury can lead to costly long-term care, which is often not fully covered by Medicare.

• Coverage options:

  • Long-term care insurance

  • Hybrid life/long-term care policies

  • Medigap policies

  • Medicare Advantage plans

Planning ahead by evaluating supplemental insurance options can help protect your retirement savings from being drained by unforeseen medical expenses.

2. Portfolio Failure and Outliving Your Savings

Another major retirement risk is longevity risk—the possibility of outliving your assets. Without a sustainable withdrawal strategy, retirees may run out of money sooner than expected.

Withdrawal Strategy Challenges

Many retirement planning strategies rely on rules of thumb, such as:

• The 4% Rule: Suggests withdrawing 4% annually from a portfolio invested 60% in bonds and 40% in equities. However, due to market volatility and prolonged low interest rates, studies show this approach may have up to a 50% failure rate.

• Divide-by-20 or 30 method: Some retirees divide their savings by an estimated number of years in retirement, but this method fails if you live longer than expected.

Developing a long-term withdrawal plan that accounts for market fluctuations, inflation, and increasing longevity is crucial for a financially secure retirement.

3. Unexpected Financial Responsibility and Family Obligations

Many retirees find themselves facing financial challenges they did not anticipate. Today’s retirees often support:

• Adult children facing financial instability

• Aging parents with medical or long-term care needs

• A spouse’s death, which can dramatically affect household income

Potential Impacts on Retirement Income

• Changes in Social Security benefits

• Alterations in tax brackets

• Reduced or shifted pension payments

• Added expenses from family financial emergencies

A flexible and well-structured financial plan can help accommodate these unexpected responsibilities without jeopardizing your retirement stability.

How to Protect Yourself from Retirement Risks

While these risks can be daunting, careful planning can help you mitigate them. Consider speaking with a trusted financial professional and ensuring you understand how your investments are managed—especially if a broker recommended high-risk or unsuitable investments for your retirement portfolio.

If you believe you suffered investment losses due to broker negligence, misrepresentation, or unsuitable recommendations, you may have legal options.

Free Consultation

The foregoing information, which is all publicly available, is being provided by The White Law Group. The White Law Group, LLC is a national securities fraud, FINRA arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Seattle, Washington.

For a free consultation with a securities attorney, please call The White Law Group at 1-888-637-5510.

Frequently Asked Questions (FAQs)

1. What are the most common financial risks in retirement?

The most common retirement risks include market volatility, rising health-care expenses, longevity risk (outliving your assets), and unexpected family financial obligations. Many retirees also face risks from unsuitable investment recommendations, which can lead to significant losses.

2. How can I protect my retirement savings from investment losses?

You can help protect your retirement savings by diversifying your investments, using a sustainable withdrawal strategy, and working with a financial advisor who understands your long-term goals. If your advisor recommended high-risk or unsuitable investments, you may be able to recover losses through FINRA arbitration.

3. What should I do if I believe my financial advisor mismanaged my retirement portfolio?

If you suspect negligence, unsuitable recommendations, or misrepresentations by your advisor, you should gather your account statements, review all investment disclosures, and contact a securities attorney. The White Law Group may be able to help you pursue recovery of investment losses through FINRA dispute resolution.