Looking Beyond Market Volatility
When most people picture retirement risks, they think about a stock market downturn. And that’s understandable — markets can be unpredictable, and volatility grabs headlines. But focusing only on market swings can leave you blind to other forces that quietly erode wealth over time.
Some of the greatest risks retirees face are slow-moving and subtle. They don’t come with breaking news alerts or dramatic headlines, but they can still have a profound impact on your financial security. Inflation, longevity, the sequence of investment returns, and healthcare costs are four of the biggest — and often overlooked — challenges. By understanding them, you can make wise choices to help you stay on track throughout retirement.
1. Inflation Risk
Inflation doesn’t always feel dramatic in the short term, but it has a compounding effect over decades. Even when annual increases seem “reasonable,” the cumulative impact can be significant. For example, at just 3% annual inflation, something that costs $1,000 today will cost more than $2,000 in 25 years. That means a couple in their mid-60s may see everyday expenses double by the time they reach their 90s.
The tricky part is that retirees often shift their investments toward more conservative assets at the very same time they need to be thinking about long-term purchasing power. A portfolio that feels “safe” might cover today’s bills, but if it doesn’t keep pace with inflation, it could gradually erode your lifestyle.
Healthcare, housing, groceries, and utilities are all areas where costs have historically outpaced general inflation 1. A gallon of milk or a prescription refill that costs a few dollars more might not seem alarming, but multiplied across decades, the difference is real. Planning for inflation means building a strategy that balances short-term stability with enough growth to sustain future spending.
2. Longevity Risk
We tend to think of longevity as a blessing — and it is. But from a financial perspective, it can also create strain. Retiring at 65 or older is no longer unusual, and many people will spend 25 to 30 years in retirement. For couples, the odds are high that at least one spouse will live well into their 90s 2.
Longevity risk isn’t simply about the fear of “running out” of money. It’s about understanding how decades of withdrawals, taxes, inflation, and healthcare costs interact. What looks like a solid nest egg at the start of retirement may begin to feel stretched thin after 20 years, particularly if unexpected expenses arise along the way.
There’s also the emotional side of longevity. Many retirees underestimate how their spending patterns may change later in life. While early retirement often comes with higher discretionary spending — travel, hobbies, experiences — the later years bring more healthcare needs and potential long-term care costs. Planning for both phases is critical.
A comprehensive plan accounts not only for average life expectancy, but also for the very real possibility of living much longer. By stress-testing your income strategy for different scenarios, you can help ensure your wealth supports you throughout your lifetime, not just the first chapter of retirement.
3. Sequence of Returns Risk
This concept is less well-known but incredibly important. Sequence of returns risk refers to the order in which you experience market gains and losses in retirement.
If you’re withdrawing money from your portfolio and the market experiences a downturn early on, the impact can be more severe than the same downturn happening later. That’s because those early losses are locked in through withdrawals, leaving less principal to recover when the market rebounds. Two retirees with identical average returns can end up with very different outcomes simply because of timing.
Imagine two portfolios, each earning an average of 6% over 20 years. One experiences strong returns early and weak returns later, while the other has weak returns first and strong ones later. On paper, both average the same performance. But for the retiree taking withdrawals, the one who hit poor returns early could see their savings depleted far faster.
Managing sequence risk often involves “bucketing” strategies — setting aside short-term income in more stable investments, while keeping longer-term money in growth-oriented assets. This way, you’re not forced to sell during downturns. It’s another example of why retirement planning isn’t just about average returns, but about structuring your income intelligently.
4. Healthcare and Long-Term Care Costs
Healthcare is one of the most underestimated risks in retirement. Medicare provides essential coverage, but it doesn’t cover everything. Premiums, deductibles, and out-of-pocket expenses can add up quickly. And if long-term care becomes necessary, the costs can be staggering.
A private room in a nursing home can average well over $100,000 per year in many states, and assisted living facilities can also run into the tens of thousands annually 3. These aren’t one-time expenses — they can stretch on for years. For couples, the challenge is compounded: one spouse may need extensive care while the other continues to manage household expenses.
These costs don’t just affect your budget; they can also disrupt your financial plan if they force you to draw down assets more quickly than expected. Without a strategy, healthcare expenses can crowd out other priorities — travel, gifts, charitable giving — and change the retirement you envisioned.
Addressing this risk doesn’t always mean buying long-term care insurance, though that can be an option. It may also involve creating dedicated savings, leveraging home equity, or structuring income to absorb potential costs. The key is to have the conversation early and build healthcare into your retirement plan from the start.
The Bigger Picture
Each of these risks — inflation, longevity, sequence of returns, and healthcare — operates in the background, often without immediate visibility. They’re not dramatic like a stock market crash, but they can be just as impactful, if not more. The danger lies in ignoring them until they become pressing.
The good news is that all of these risks can be managed with thoughtful planning. A comprehensive retirement strategy looks beyond investment performance and addresses the forces that really shape long-term security.
Next Steps
At South Shore Retirement Services, we believe retirement is a journey, not a destination. The goal isn’t just to protect what you’ve built, but to make sure it keeps working for you through every phase of life.
And if you’d like to review your plan in light of these risk factors, our team would be happy to sit down with you for a no-pressure conversation.
DISCLOSURE: Investment advisory products and services made available through AE Wealth Management, LLC (AEWM), a Registered Investment Advisor. Insurance products are offered through the insurance business Rowlette and Associates, LLC DBA South Shore Retirement Services (RA/SSRS). RA/SSRS is also an Investment Advisory practice that offers products and services through AE Wealth Management, LLC (AEWM), a Registered Investment Advisor. AEWM does not offer insurance products. The insurance products offered by RA/SSRS are not subject to Investment Advisor requirements. 3327647 -10/25
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