The Six Risks of Retirement

A couple came to see me a few years back. They’d done everything right. Thirty years of steady saving, a paid-off house, about $1.4 million across their 401(k)s and IRAs. They retired in January, and by October the market had dropped almost 20 percent.

Here’s the part most people miss. Their neighbor, same age, same portfolio, same drop, was fine. He was still working. His accounts had time to recover, and his paycheck kept coming while they did.

But this couple was withdrawing. Every month they sold shares at depressed prices to create income, and those shares were gone for good when the recovery came. Same market. Same loss on paper. Completely different outcome, because the rules change on the way down.

That’s one of six risks, and it’s the story of this article. (The couple, like every client story here, is a composite drawn from real situations, shared as an illustration.)

In my book, Retire On Purpose, I put it plainly:

You will face six risks in retirement today, each of which requires careful navigation to secure your financial future. These risks are Market, Tax, Longevity, Liquidity, Inflation, and Mortality.

Let’s walk through what each one actually looks like at the kitchen table.

Market risk: the timing problem

Everyone knows markets go up and down. What most people don’t know is that in retirement, when they go down matters more than how much.

The industry calls it sequence of returns risk. I call it the couple from January. A 20 percent drop in your first two years of withdrawals can reshape three decades, while the same drop in year fifteen might barely register. You can’t control which one you get. You can only build a plan where it doesn’t matter, usually by making sure the income you need soon isn’t sitting in the assets that swing.

Tax risk: the bill you didn’t plan for

I had a client who retired at 62 and paid almost nothing in taxes for years. He’d joke that retirement was the best tax shelter he ever found. Then he turned 73, required minimum distributions kicked in from four different accounts at once, and the IRS quietly became one of his largest annual expenses.

That’s the RMD time bomb, and it’s set decades before it goes off. Every dollar in a tax-deferred account carries an unpaid tax bill, and the government, not you, decides when it comes due. The window to change that outcome is real, but it closes. Withdrawal order, Roth conversions in the right years, which account funds which goal: these decisions set your tax bill years in advance.

Longevity risk: 360 paychecks

A 30-year retirement is 360 monthly paychecks that have to come from somewhere. Nobody hands you that schedule when you retire. You have to build it.

Longevity is the risk multiplier behind every other risk on this list. The longer you live, the more market cycles you’ll ride through, the more tax law changes you’ll see, the more inflation compounds. Which is why the answer isn’t a bigger pile of money. It’s an income floor: the amount that shows up every month no matter what the market did, built from Social Security, any pension, and, where it fits, a fixed income stream from an annuity.

Liquidity risk: the money you can’t reach

This is the risk most planning frameworks skip entirely.

Picture needing $60,000 for a health event, a roof, an adult child’s emergency. You have the money, technically. But it’s locked in accounts with penalties, or in assets you’d have to sell at the worst possible moment, or in property that takes months to turn into cash. Wealth you can’t reach when life demands it isn’t wealth. It’s a number on a statement.

A sound plan keeps a deliberate cash and access layer, sized to your life, so a surprise expense never forces you to wreck the rest of the plan to pay for it.

Inflation risk: the slow leak

Inflation never sends a bill. It just quietly shrinks what your income buys.

At 3 percent inflation, the purchasing power of a fixed dollar is cut roughly in half over 24 years. A retirement income that feels comfortable at 65 can feel tight at 80 and genuinely stressful at 90, even though the number on the check never changed. This is why “safe” money that earns nothing isn’t actually safe over a 30-year retirement, and why part of your portfolio has to keep growing even after you stop working.

Mortality risk: the survivor’s math

Nobody enjoys this conversation, so most plans just skip it. Here’s why yours shouldn’t.

When one spouse passes, two Social Security checks become one. The household’s tax brackets compress at the same time, because a surviving spouse files single. Income drops and the tax rate on what’s left often rises, in the same year. That’s the survivor’s math, and it’s brutal when nobody has planned for it.

Mortality risk has a second side: what transfers to your family, and how. Without a plan, you leave your loved ones a scavenger hunt of accounts, passwords, and guesses about what you wanted.

Five pillars against six risks

Here’s the thing about these six risks: they don’t take turns. They interact.

I think of a retirement plan the way a pilot thinks about an aircraft. A plane isn’t one system. It’s engines, fuel, controls, instruments, all interdependent. When you adjust one control, climb, turn, descend, the others have to respond, or the flight gets ugly. Retirement works the same way. A Roth conversion changes your tax picture and your RMDs and what your survivor inherits. A market drop tests your income floor and your liquidity layer at the same time.

That’s why the answer to six risks isn’t six separate products. It’s five pillars working as one coordinated system.

Your income pillar answers longevity and inflation. Your tax pillar defuses the RMD time bomb. Your investment pillar manages market risk and holds the liquidity layer. Your protection pillar stands guard over health events and the survivor’s income. And your legacy pillar makes sure what transfers, transfers the way you intended.

Six ways it breaks. Five pillars that hold it. One plan.

If you want to see how the pillars fit together, start with the planning areas. And if you’re wondering which of the six risks your own plan is most exposed to, that’s exactly the conversation a retirement roadmap is built to answer. Bring your questions. You don’t have to have it all figured out before you call.