The Overlooked Risks to Protect Against in a 30-Year Retirement
What's the biggest threat to the long-term security of your retirement plan?
Many seniors would answer, "The economy," or "The markets." And that makes sense. No matter how much you try to control your screen time, financial news will always make a big impression on how you feel about your money.
But as nerve-wracking as market fluctuations can be in the moment, in the long run, they continue trending upwards and generating positive returns for most investors.
That's why a truly comprehensive plan should be prepared to manage not just market fluctuations, but more personal and less obvious threats that can erode a senior's wealth over the course of a 30-year retirement.
The next time you meet with your advisor, discuss how your plan protects you and your money against these five threats:
1. Longevity Risk: Outliving Your Wealth
Today's seniors are exercising more, eating better, and taking advantage of major advancements in health care. The decades of retirement you may have ahead of you could be a real blessing. Imagine years of travel, of watching your grandkids grow up, of enjoying small moments of bliss with your spouse.
But longevity can also be a major financial challenge.
In a typical retirement, spending may be higher in the “go-go” years, then drop as folks start staying closer to home and, in some cases, rise again due to increased health care costs in the later years. Inflation will also continue to gradually increase prices each year. Compound those factors by a decade, or two, or three, and seniors who don't have a plan could find themselves facing some really tough choices as they age.
Defense Strategies
Layered income streams: Supplement guaranteed income from sources like Social Security and pensions with carefully planned withdrawals from your investment and savings accounts.
Flexible withdrawal strategies: Review your budget annually to determine what you need to spend, what you'd like to spend on larger retirement goals, and which income streams will be most advantageous to use.
Periodic plan updates: In addition to annual check-ins with your advisor, reach out when any new spending needs, including health care challenges, arise so that you can start adjusting your plan.
2. Healthcare and Long-Term Care Surprises
As valuable a benefit as Medicare is, it isn't free, and it doesn't cover everything. Premiums, deductibles, specialist visits, and prescription drug costs can add up quickly.
One of the most significant costs that Medicare usually doesn't cover is long-term care. Paying out of pocket for in-home nursing or assisted living facilities can strain even an affluent retiree's resources.
Defense Strategies
Review your Medicare coverage annually: During the Open Enrollment period in the fall, talk to a professional who can help you find a plan that fits your health care needs and your financial plan.
Dedicated healthcare funding plan: Health Savings Accounts (HSAs) and emergency savings buckets can provide a cushion during the later years of retirement.
Long-term care insurance: If you or your spouse has ongoing ailments or medical histories that make long-term care more likely, extra insurance can be a valuable investment.
Family caregiving discussions: Being open with your family about your health and your needs can limit surprises and open up more options to secure the care you need.
3. Sequence of Returns Risk
Retiring during a downturn isn't necessarily the end of the world. But if your plan isn't prepared for market fluctuations, lower returns in the early years of retirement can have a disproportionately negative impact on your wealth. In worst-case scenarios, if not allocated properly, you might be forced to sell depressed assets to make ends meet, locking in losses rather than weathering a temporary dip. And if you have no choice but to keep withdrawing from your depreciated nest egg while the markets continue to correct, you might find yourself in a hole that's difficult to climb out of.
Defense Strategies
Fixed income reserves: Keen Wealth has a disciplined process for helping seniors maintain enough fixed income in bonds and cash to cover at least five years of their income needs. These streams can isolate retirees from market dips while preserving equity investments for more long-term needs.
Flexible spending rules: The markets are going to fluctuate. So will your life. Your plan needs to be ready to respond, whether that means withdrawing more to cover an emergency or scaling back a retirement goal to maintain your overall well-being.
Diversified income streams: If you have a mix of cash, benefits like Social Security, and taxable and tax-advantaged accounts, you can work with an advisor to adjust your sequence of returns so that your needs are met, your tax liability is optimized, and your long-term wealth continues to grow.
4. Inflation and Erosion of Purchasing Power
A 3% loss of your purchasing power every year may not seem like much. But compounded over decades, inflation can make it difficult for retirees to maintain their standard of living. Affluent retirees often feel the pinch, especially if goals like extended travel and relocating have to be significantly downsized.
Defense Strategies
Plan ahead: Inflation is a known retirement variable. Incorporate a 3% rise in costs into your spending plan so you're ready for it.
Keep growing your wealth: While many retirees shift their resources into more conservative assets like cash and bonds, maintaining a healthy allocation of equities can keep your wealth from plateauing.
Use guaranteed income with cost-of-living adjustments (COLA): When you're considering the best time to take Social Security, don't forget to factor in the annual COLA adjustment. Many pension plans also include annual COLAs that can help you cope with rising costs.
Rebalance smartly: If your plan becomes too conservative in retirement, you might miss out on growth opportunities like rebalancing and "buying low" on depreciated equities, tax-loss harvesting to lower your taxable income, or converting funds into a Roth IRA.
5. Family and Legacy Surprises
Many of today's retiring boomers are "sandwiched" between supporting their adult children and their elderly parents. Contributing to a grandchild's college education is another common retirement goal. A spouse who faces a sudden health scare or is forced into an unexpected early retirement might cause an additional spending strain. It's also possible that during a 30-year retirement, your family will keep getting bigger, and, potentially, more complicated. Even affluent seniors can only do so much for so many people before they put their own financial security and legacy planning at risk.
Defense Strategies
Set boundaries: Say “No” when you have to, and when you do give family members financial support, be clear about the terms.
Offer other ways to help: Open up your personal and professional networks to family members who need mentorship or a career change.
Review your estate plan every year: Make sure you have the necessary documents in order, and that they reflect your current wishes as to how your assets will be distributed, who your beneficiaries are, and who's in charge of keeping you and your estate safe. Consider establishing trusts and donor-advised funds to put some guardrails around how your heirs inherit and use your money.
Plan for More than the Markets
As important as the financial markets are to any financial plan, a 30-year retirement will have to adjust to much more than what’s happening on Wall Street.
If you’re working with an advisor, have a conversation to stress test your plan against threats to your health, your spending power, your retirement goals, and your family dynamics. Think about risks you might be overlooking and assumptions you shouldn’t be taking for granted.
And if you don’t have an advisor, come visit Keen Wealth and let’s discuss how our comprehensive planning process can help you feel more confident about how you’ll face a wide range of challenges in retirement.
About Bill
Bill Keen is a financial advisor with over 30 years of industry experience. As the founder and CEO of Keen Wealth Advisors, a registered investment advisory firm, he focuses on providing personalized retirement planning designed to help people thrive before and during their retirement years. With a passion for educating others, Bill regularly blogs about retirement planning, hosts the podcast Keen on Retirement, and has contributed to Forbes, U.S. News and World Report, Reuters, Wall Street Journal’s Market Watch, Yahoo Finance, and other publications. Based in Overland Park, Kansas, Bill and his team work with clients throughout the greater Kansas City area and across the nation. To learn more, connect with him on LinkedIn or visit www.keenwealthadvisors.com.
KWMG, LLC’s dba Keen Wealth Advisors (“company”) is an SEC Registered Investment Advisor located in Overland Park, KS. The company and its representatives may only conduct business in those states where registered or where excluded/exempt or from licensure. For registration information please contact the SEC or the state securities regulators for the states where the company is notice filed. A copy of the company ADV is available upon request. Advisory services are only offered to clients or prospective clients where the company and its representatives are properly licensed or exempt from licensure. No advice may be rendered by the company unless a client service agreement is in place. This information is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy and is for illustrative purposes only. Clients and prospective clients must consider all relevant risk factors involved with each strategy, including costs or fees, and their own personal financial situations before trading.
The views outlined in the book, Keen on Retirement Engineering the Second Half of Your Life, are those of the author and should not be construed as individualized or personalized investment advice. Any economic and/or performance information cited is historical and not indicative of future results. Economic forecasts set forth may not develop as predicted.
The Amazon Best Seller ranking listed on marketing materials is specifically referring to Best Seller rankings for the Kindle Top 100 Paid Lists under the subcategories of: Budgeting and Financial Risk Management, based on data as of September 5, 2019 and the second edition under Financial Risk Management on October 26, 2022. Amazon rankings although relevant on how a product is selling overall doesn’t necessarily indicate how well an item is selling among other similar items or similar item categories. Amazon may choose the most popular categories or subcategories within which an item has a high ranking to determine its best seller rankings. These rankings are updated hourly and as a result, should be expected to fluctuate as such. Keen Wealth Advisors and Amazon are not affiliated entities.
The Steve Sanduski Advisor Network, Belay Advisor, LLC and other third-party contributors to our blogs and podcasts are not affiliated with Keen Wealth Advisors.
For additional details on Keen Wealth Advisors, please visit https://www.keenwealthadvisors.com/important-disclosures.
20250709-4646773-14632190