Risks in Retirement
Understand the Challenges Before They Surprise You
Managing the Hidden Risks That Can Derail Retirement
Life is fraught with risk. You can’t fully eliminate risk, but if you understand what they are you can mitigate them. There are at least 27 risks we face in retirement. Among them are Longevity Risk, Inflation Risk, Health care cost risk, Tax Risk, Long Term care cost risks, Stock/Bond market risk, and Sequence of Returns risk.
Sequence of Returns Risk
Protecting Your Retirement from the Unexpected
The One Risk You're Most Likely Not Planning For
Sequence of Returns Risk
What is it?
Sequence of returns is the order in which your investment returns (gains or losses) happen. The risk is when the market declines when you first retire, and/or start withdrawing income, leaving you with less money to grow over your lifetime.
Why Does It Matter?
Early Years Are Critical: A market downturn in the early years, when you begin taking withdrawals from your savings, can have a detrimental long-term effect on the longevity of your savings.
Sustainable Withdrawals Are Key: Without a plan, you risk depleting your assets too quickly.
How Do You Mitigate This Risk?
Plan in advance! Our retirement income strategies are designed to protect you from the effects of sequence of returns risk. We focus on:
- Diversified Portfolios: Spreading investments across asset classes to reduce volatility.
- Cash Flow Management: Structuring withdrawals to minimize impact during downturns.
- Income-Generating Strategies: Building a steady income stream that’s less dependent on market fluctuations.
- Dynamic Adjustments: Regularly reviewing your plan to adapt to changing market conditions and life circumstances.
Feel Secure About Your Retirement
With the right strategies in place, you can weather market challenges and maintain your desired lifestyle. Let’s work together to build a retirement plan that stands the test of time.
Sequence of Returns Hypothetical Example
Below is an example of two hypothetical investors who invest over a ten year period. They both experience the same sequence of returns only in reverse order. Investor A has high returns in the first two years, with negative returns in the final two years. Whereas investor B has negative returns in the first two years with high returns in the final two years.

As you can see during accumulation the final result is the same, because no withdrawals are taken from their respective accounts. The average annualized compound rate of return is the same, and since no withdrawals are taken the final ending account value is the same.
Durring Accumulation
IMPORTANT DISCLAIMER: The charts below are purely fictional and hypothetical. They do NOT represent an actual investment of any kind or actual investment performance of any investment.
The charts are for illustrative purposes and are overly simplistic. They are intended to help one understand one of many risks one faces during retirement.
Investor A
Deposit: $100,000 - Average Return: 6.0% - No Withdrawals
| Year | Rate of Return | Annual Gain/Loss | Ending Value |
|---|---|---|---|
| Year 1 | 30 | +$30,000 | $130,000 |
| Year 2 | 20 | +$26,000 | $156,000 |
| Year 3 | 10 | +$15,600 | $171,600 |
| Year 4 | 10 | +$17,160 | $188,760 |
| Year 5 | 10 | +$18,876 | $207,636 |
| Year 6 | 10 | +$20,764 | $228,400 |
| Year 7 | 10 | +$22,840 | $251,240 |
| Year 8 | 10 | +$25,124 | $276,364 |
| Year 9 | -20 | –$55,273 | $221,091 |
| Year 10 | -30 | –$66,327 | $154,764 |
Investor B
Deposit: $100,000 - Average Return: 6.0% - No Withdrawals
| Year | Rate of Return | Annual Gain/Loss | Ending Value |
|---|---|---|---|
| Year 1 | -30 |
–$30,000 | $70,000 |
| Year 2 | -20 |
–$14,000 | $56,000 |
| Year 3 | 10 | +$5,600 | $61,600 |
| Year 4 | 10 | +$6,160 | $67,760 |
| Year 5 | 10 | +$6,776 | $74,536 |
| Year 6 | 10 | +$7,454 | $81,990 |
| Year 7 | 10 | +$8,199 | $90,189 |
| Year 8 | 10 | +$9,019 | $99,208 |
| Year 9 | 20 |
+$19,842 | $119,050 |
| Year 10 | 30 |
+$35,715 | $154,765 |
Durring Distribution
IMPORTANT DISCLAIMER: The charts below are purely fictional and hypothetical. They do NOT represent an actual investment of any kind or actual investment performance of any investment.
The charts are for illustrative purposes and are overly simplistic. They are intended to help one understand one of many risks one faces during retirement.
Investor A
Deposit: $100,000 - Average Return: 6.0% - $6,000 Annual Withdrawals
| Year | Rate of Return | Beginning Value | Withdrawal | Ending Value |
|---|---|---|---|---|
| Year 1 | 30 | $100,000 | $6,000 |
$124,000 |
| Year 2 | 20 | $124,000 | $6,000 |
$142,800 |
| Year 3 | 10 | $142,800 | $6,000 |
$151,080 |
| Year 4 | 10 | $151,080 | $6,000 |
$160,188 |
| Year 5 | 10 | $160,188 | $6,000 |
$170,207 |
| Year 6 | 10 | $170,207 | $6,000 |
$181,228 |
| Year 7 | 10 | $181,228 | $6,000 |
$193,351 |
| Year 8 | 10 | $193,351 | $6,000 |
$206,686 |
| Year 9 | -20 | $206,686 | $6,000 |
$159,349 |
| Year 10 | -30 | $159,349 | $6,000 |
$105,544 |
Investor B
Deposit: $100,000 - Average Return: 6.0% - $6,000 Annual Withdrawals
| Year | Rate of Return | Beginning Value | Withdrawal | Ending Value |
|---|---|---|---|---|
| Year 1 | -30 |
$100,000 | $6,000 | $64,000 |
| Year 2 | -20 |
$64,000 | $6,000 | $45,200 |
| Year 3 | 10 | $45,200 | $6,000 | $43,720 |
| Year 4 | 10 | $43,720 | $6,000 | $42,092 |
| Year 5 | 10 | $42,092 | $6,000 | $40,301 |
| Year 6 | 10 | $40,301 | $6,000 | $38,331 |
| Year 7 | 10 | $38,331 | $6,000 | $36,164 |
| Year 8 | 10 | $36,164 | $6,000 | $33,780 |
| Year 9 | 20 |
$33,780 | $6,000 | $34,536 |
| Year 10 | 30 |
$34,536 | $6,000 | $38,897 |
As you can see...
The sequence of returns has a dramatic impact on the ending account value when taking withdrawals from an account over time. The annualized rate of return is the same in both accounts, only the ending value is much different.
The game has changed!
You can't utilize the same strategies you used while you're accumulating wealth as you do while taking income from your accounts.
Below are other risks we face.
Longevity Risk is a risk multiplier
Longevity risk, the risk of living too long. It's one risk that multiplies or amplifies the others.
This stands to reason as the longer we live, the longer our savings are exposed to them.
27 Retirement Risks You Need to Know
Most people spend decades working hard and saving for retirement—yet very few spend enough time planning for what can go wrong after the paycheck stops. Retirement comes with a new set of financial, lifestyle, and emotional risks that are easy to overlook until it's too late.
Longevity Risk
The risk of living longer than expected—and outliving your savings.Inflation Risk
Gradually rising costs can erode your purchasing power over time.Market Risk
Volatile or declining markets can reduce your retirement income and investment balances.Sequence of Returns Risk
Taking withdrawals during a down market early in retirement can have long-term impacts.Healthcare Risk
Medical expenses tend to rise with age and can be unpredictable.Long-Term Care Risk
Extended care—either at home or in a facility—can deplete savings quickly.Cognitive Decline Risk
Losing the ability to manage finances or make decisions can open the door to errors or exploitation.Tax Risk
Withdrawals from IRAs, pensions, and Social Security can come with significant tax burdens if not planned for.Policy Change Risk
Changes to tax laws, Social Security, or Medicare can affect your retirement plan.Social Security Timing Risk
Claiming benefits too early (or too late) can permanently reduce income.Pension Risk
Not all pensions are guaranteed. Company insolvency or policy changes can reduce benefits.Withdrawal Rate Risk
Taking out too much too soon can leave you short in later years.Interest Rate Risk
Low rates may limit your ability to generate income from savings.Reinvestment Risk
You may not be able to reinvest at favorable rates when bonds or other fixed investments mature.Housing Risk
Downsizing, relocating, or maintaining a home can involve unexpected costs or complexity.Liquidity Risk
Having money tied up in assets that can’t easily be converted to cash can create stress in emergencies.Caregiver Risk
Providing care for a spouse or loved one may affect your time, health, and financial resources.Legacy Risk
Without a clear estate plan, your assets may not be passed on the way you intend.Divorce Risk
“Gray divorce” is becoming more common and can significantly alter retirement income and assets.Widowhood Risk
Losing a spouse can change your financial picture dramatically, including tax filing status and benefit eligibility.Inflation of Lifestyle Risk
Spending too much in early retirement can strain future income and reserves.Overconcentration Risk
Relying too heavily on one stock, sector, or type of investment can increase vulnerability.Insurance Gap Risk
Having insufficient or outdated coverage can expose you to major costs.Fraud & Scam Risk
Older adults are often targeted by financial scams—especially when cognitive ability begins to decline.Employment Risk
Relying on part-time or consulting work in retirement may not always be reliable or possible.Family Dependency Risk
Financial support for adult children or aging parents can derail your retirement income plan.Emotional Risk
Loss of structure, purpose, or connection after leaving work can lead to decisions driven by fear or uncertainty.
Take Control of Retirement
Let’s Build a Plan That Accounts for the What-Ifs
From market downturns to rising healthcare costs, retirement comes with risks—but you don’t have to face them alone. We’ll help you create a strategy that anticipates the challenges and gives you confidence moving forward.
