Did you know there’s at least 18 different financial risks people need to guard against for retirement? In this episode of The Retirement Huddle podcast, Mark Howard walks us through five of the most common threats.
- Market risk
Market risk is what most people think of when they think about risk. It’s important to address because of how easily it can impact your retirement.
The majority of people who come into our office are taking too much risk, and there’s no reason for it. Typically, they’ve worked with same advisor for years and have relied on that person to handle their retirement savings so they can live off 4% of the money a year. Most of the time, that does not work.
We will do a risk analysis of your portfolio and explain how to protect your money.
- Interest rate risk
Most people assume if they don’t borrow money very often that they won’t be affected by interest rates going up. But rising interest rates can cause bond dividends to go down.
- Inflation risk
If you plan to rely on social security or pensions, inflation can be problematic. Most pensions do not increase, and the income streams remain stagnant. Social security has increased an average of 3.2% since it launched, but in the past 10 years it has only averaged about 1.6%.
- Tax rate risk
Taxes will likely go up once the present tax plans expire on Jan. 1, 2026. Most of us have been led to believe that you’ll be in a lower tax bracket once you retire, but there’s no guarantee of that.
- Longevity risk
If you’ve done a poor job of planning for retirement, it will be multiplied and magnified by living a long time. The longer we live, the more we’re putting our nest egg under pressure.
Mark answers the following listener mailbag questions:
Judy in Savannah just got married last month. She and her husband are both in their late 60s and lost their spouses to cancer. How can she make sure her husband’s children inherit the wealth he’s built while also making sure she’s OK financially if she outlives him?
Anna in Bluffton has a nice pension and social security benefit. She doesn’t need to take money out of her IRA because she’s in good shape financially. But it makes her nervous when she sees the account balance bounce up and down. Should she ignore it since she doesn’t rely on it for income?
Steve in Hilton Head is 58 years old and will be laid off from his job in two months. He can stay on the company’s health insurance for a year and will get a six-month severance. Should he take his pension as a monthly income or lump sum?
Thanks for listening! We’ll be back for another show every other Thursday.
[0:51] – Market risk
[2:41] – Interest rate risk
[3:47] – Inflation risk
[5:03] – Tax rate risk
[5:54] – Longevity risk
[6:55] – Mailbag: Judy in Savannah
[8:15] – Mailbag: Anna in Bluffton
[9:41] – Mailbag: Steve in Hilton Head