9 Threats to Your Retirement Income in 2026 -- and How to Protect Against Each One

Lots of activities in life carry threats. But if you're prepared, you can deal with them. Hiking in bear country? Take bear spray and don't leave a trail of sandwich crumbs. Driving cross-country? Fasten your seat belt, and rest when you're tired.

Similarly, when planning for retirement, you should be aware of risks and should take some appropriate actions. Let's review some risks and protections for retirement.

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1. Longevity risk

Here's a risk that might seem kind of good: living a very long life. The problem, retirement-wise, is that if you retire at, say, 65, and then live to 95, your retirement will be 30 years long, and your savings, investments, and other retirement income will have to support you for a long time. That's a very different situation than someone who retires at, say, 62 and then dies at 79. That retirement would be only 17 years long.

So as you save and plan and invest, try to do so assuming that you'll live a very long life -- just in case you do. One strategy for this is to buy a deferred fixed annuity -- that can start paying you a monthly sum beginning at a future age you choose. That way, once you turn 80 or whatever age you chose, you'll start getting an extra infusion of cash.

2. Asset allocation risk

As we approach and enter retirement, many people think that they should mostly be in bonds or other "safer" investments. But remember longevity -- if you retire at 65 and you live to 85 or beyond, a meaningful chunk of your nest egg will be sitting around for 20 or more years. That money will likely grow faster in the stock market.

It can be best to diversify your investments across asset classes such as stocks, bonds, certificates of deposit (CDs), and so on. A good financial advisor may help you decide what will serve you best ( but only use one who's a fiduciary as they're required to prioritize your best interest!).

3. Stock market performance risk

Remember that the stock market, while a terrific long-term wealth-building aid, also experiences occasional crashes and corrections. So only park in stocks money that you don't expect to need for five years -- or, better still, 10 years.

Be aware of "sequence of returns risk," too. That's when you retire and the market crashes or has crashed in your first few years, shrinking your nest egg. If that happens and you're taking out, say, 4% annually, you'll be depleting your nest egg faster than if the market hadn't tanked. So perhaps prepare to take out less when the market is down and more when it's up.

4. Withdrawal rate risk

Speaking of your annual withdrawals from your nest egg, read up on some strategies before deciding how much of a withdrawal is best for you -- and prepare to reevaluate your withdrawal strategy every now and then, too. Many point to the 4% rule as a good guide, but learn more about it before using it. You may need to be spending less in retirement than you had hoped.

5. Inflation risk

Inflation has averaged around 3% over many decades, but it can sometimes be quite high. And even at 3% annually, that's enough to shrink your purchasing power by half or more over 25 years. So plan for inflation, and don't assume that living on, say, $60,000 annually will serve you well in your first and last years of retirement.

6. Healthcare costs risk

It's no secret that healthcare costs are high. And they may get much steeper over the coming years. So be sure to factor this into your planning and save accordingly. You may be able to keep these costs in check to some degree by getting and staying as healthy as possible and by making smart Medicare decisions.

7. Policy risk

You probably know that Social Security is facing a shortfall. If nothing is done to strengthen it, Social Security's trust funds' surplus will run out within a few years -- and benefits may shrink by 28% or so.

So stay informed about policy changes coming out of Washington, as they could affect you a lot. And while hoping for the best, prepare for the worst -- perhaps by setting up multiple income streams for your future years.

8. Family matters risk

There may not be much you can do about this risk, but at least keep it in mind: the risk that family issues will affect your retirement. This might include having to take in or care for a loved one or dealing with a spouse's unexpected sudden health decline. A divorce or widowhood can change your retirement picture considerably, too.

9. Cognitive impairment risk

Finally, be aware that as we age, many of us won't be as on top of financial matters as we used to be. We can also be especially vulnerable to scams, as scammers like to target the elderly. You may want to enlist the help of a trusted loved one as you age, perhaps setting up durable powers of attorney, too.

Another good idea is looking into investing in fixed annuities and/or dividend-paying stocks. You might do this early on in your retirement -- and then you can look forward to receiving regular cash infusions with little work required of you.

Above all, do make sure you have a solid retirement plan in place -- and then execute it well.

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