3 hidden retirement risks—and how to address them
By Matt D’Amico, CFP®, ChFC®
If you’re within a decade of retirement, or just stepping into it, ask yourself a simple but important question: How do I recognize the hidden retirement risks that could threaten my plan before it’s too late—and how can financial planning support that process?
In this article, I walk through three often-overlooked areas where retirement plans are most vulnerable and share practical risk management strategies you can use to prepare for what’s ahead. Many of the biggest threats to a retirement plan aren’t obvious until it’s too late.
1. The Hidden Impact of Longevity, Inflation, and Healthcare Costs
One of the most overlooked risks to a retirement plan is the combined impact of longevity, inflation, and rising healthcare costs over time.
Let’s start with longevity.
If you retire at 62, there’s a real possibility your retirement could last 25–30 years. That changes the math. A portfolio isn’t just funding a phase of life, it’s supporting decades of living expenses.
Now layer in inflation.
Even at a modest 3% annual rate, prices can double in about 24 years using the Rule of 72.
That means a lifestyle costing $100,000 today could require closer to $200,000 over a typical retirement horizon.
Then there’s healthcare.
Many retirees underestimate:
- Medicare premiums and supplemental coverage
- Out-of-pocket costs for prescriptions and procedures
- Long-term care expenses pending on care needs
Risk management strategies here often include:
- Building inflation-adjusted income projections
- Stress-testing healthcare costs over time
- Evaluating long-term care coverage or self-funding options
These aren’t abstract concerns as they directly impact how long your assets last.
2. The Hidden Risk of Sequence of Returns
Sequence of returns is one of the most overlooked risks in retirement planning and refers to the timing of market performance relative to when you begin taking withdrawals.
Here’s a simple comparison:
- Retiree A experiences strong market returns early in retirement, followed by a downturn later.
- Retiree B experiences a downturn in the first few years, then strong returns afterward.
Even if both retirees average the same return over time, their outcomes can look very different.
This is because withdrawals during a down market lock in losses.
Let’s say you retire with $1.5 million and plan to withdraw $75,000 per year. If the market drops 20% early on, and you’re still withdrawing income, you’re selling assets at lower values. That reduces the base your portfolio has to recover from.
In some scenarios, this can lead to situations where:
- A market correction within the first 2–3 years of retirement creates lasting pressure on a portfolio.
- Retirees begin to question whether they need to cut spending or adjust their plans.
Risk management strategies to address sequence of returns include:
- Structuring portfolios with a mix of growth and stability
- Creating a “bucket” approach for near-term income needs
- Adjusting withdrawal strategies based on market conditions
The goal is to reduce the likelihood of being forced into difficult decisions during a downturn.
3. The Hidden Risk of Overlooking These Planning Gaps
One of the most common (and often overlooked) risks is not having a clear plan in place to address these challenges. Without a strategy, even well-funded retirement plans can become vulnerable to avoidable setbacks.
A strong plan starts by aligning income with expenses. Identify your essential costs and aim to cover those with more predictable income sources like Social Security or pensions. This can reduce pressure on your portfolio during market downturns.
Next, build flexibility into your withdrawals. Instead of taking a fixed amount every year, consider adjusting withdrawals based on market conditions. For example, modestly reducing withdrawals during a down market can help preserve your portfolio over time.
A well-structured plan also revisits your investment allocation as retirement approaches. The strategy that worked during your peak earning years may expose you to more volatility than you’re comfortable with now. A balanced approach that supports both growth and stability can help your portfolio handle different market environments.
Finally, account for healthcare and long-term care costs in your plan. Estimating these expenses and setting aside resources for them can prevent unanticipated costs from disrupting your overall strategy.
Start Addressing Your Plan’s Hidden Retirement Risks
You can begin addressing these hidden retirement risks by reviewing how your current plan accounts for longevity, inflation, healthcare, and market timing. Even small adjustments to your investment strategy, withdrawal approach, or income planning can influence long-term outcomes.
If you’re preparing for retirement or recently retired, this is a good time to revisit your plan and consider whether your current plan fully accounts for the risks you may face over the next 20–30 years.
A thoughtful review with Networth Advisors, LLC can help you see where your plan is aligned, and where a few adjustments may be worth considering.
To schedule a meeting with our team, call (800) 822-3639 or email schedule@networthadvisorsllc.com.
Frequently Asked Questions
What are the most common hidden retirement risks?
Some of the most common hidden retirement risks include longevity, inflation, rising healthcare costs, and sequence of returns. These factors can quietly erode a retirement plan over time if they aren’t properly accounted for. At Networth Advisors, we help clients identify and plan for these risks as part of a comprehensive retirement strategy.
How can I protect my retirement plan from market volatility?
Guarding your retirement plan from market volatility often involves diversifying your investments, adjusting withdrawal strategies, and maintaining a portion of assets in more stable, income-focused vehicles. Strategies like a bucket approach or flexible withdrawals can help reduce the impact of downturns, especially in the early years of retirement.
When should I review my retirement plan for hidden risks?
It’s a good idea to review your retirement plan regularly, especially as you approach retirement or experience significant life or market changes. A proactive review can help uncover gaps related to income planning, healthcare costs, and investment strategy before they become larger issues. If you’re looking for a financial partner that helps clients conduct these reviews and make thoughtful adjustments based on evolving needs, reach out to the Networth Advisors team.
About Matt
Matt D’Amico, CFP®, ChFC®, is a financial advisor at Networth Advisors who specializes in simplifying complex income planning and legacy preservation for retirees. A Saint Vincent College alumnus and co-author of Networth for Retirement, Matt leverages years of industry expertise to help clients make informed, smart financial decisions. Outside the office, he is a sports and music enthusiast who enjoys life in Pennsylvania with his wife and their dog.
