Advisors' Corner

Retirement should be a time to enjoy life without constant financial worry. Yet many retirees and those nearing retirement overlook risks that can quietly chip away at the comfortable lifestyle they’ve worked so hard to achieve.

Understanding these risks—and knowing how to plan for them—can make the difference between a secure, predictable retirement and one filled with unwelcome surprises.

1. Stock Market Turbulence

Market declines are part of investing, but they can feel especially threatening when you no longer have a paycheck to fall back on.

A short-term pullback may be just a healthy correction, while prolonged downturns can take years to recover from. A portfolio designed to produce steady interest and dividends can help shield retirees from needing to sell investments at a loss.

USSFCU IRA Certificates are one way to generate stable, predictable income while keeping your principal safe. When your essential expenses are covered by guaranteed sources, market swings are less likely to disrupt your plans.

2. Recessions

A recession can worsen the impact of a bear market. Companies may cut dividends, reducing income for investors relying on stock payouts.

To help protect your income during economic downturns, it's wise to balance your portfolio with high-quality fixed-income investments, like bonds or IRA Certificates. These typically maintain their payments unless the issuer defaults—a risk that can be managed with proper guidance.

3. Rising Medical Expenses

Healthcare is one of the biggest wild cards in retirement. Even with Medicare, out-of-pocket costs for deductibles, co-insurance, prescriptions, and long-term care can add up.

Planning ahead with supplemental insurance, Medicare Advantage plans, and long-term care coverage can help manage these expenses. This reduces the risk of large, unexpected bills draining your retirement income.

If you're unsure where to start, a financial advisor can help you estimate costs and build medical expenses into your long-term plan.

4. Inflation

Even modest inflation can erode purchasing power over a retirement that may span 20 to 30 years. While fixed-income investments provide reliable payments, they don’t automatically adjust for rising costs.

That’s why a well-diversified plan should include a mix of growth-oriented investments, such as dividend-paying stocks or real estate investment trusts. Reinvesting a portion of your income during strong market years can also help build a cushion against inflation over time.

5. Taxes

Many retirees underestimate how much taxes can affect their nest egg—especially if most of their savings are in tax-deferred accounts like 401(k)s or Traditional IRAs.

Future tax rates are unpredictable, so tax diversification is key. Spreading assets across taxable, tax-deferred, and tax-free accounts—like Roth IRAs—gives you flexibility to manage your income in retirement. Converting some assets to Roth accounts can reduce taxes later, but it requires careful planning.

Building a More Resilient Retirement Plan

The foundation of a secure retirement plan is knowing how much income you need versus what you want.

• Your essential expenses—the "I need" income—should ideally be covered by dependable sources like Social Security, pensions, and guaranteed investments such as USSFCU IRA Certificates.

• Your "I want" expenses—for travel, hobbies, and luxuries—can come from growth investments that offer more upside, but also more risk.

Most importantly, remember that doing nothing is itself a risk. Regularly review your plan, ensure your income sources are stable and diversified, and seek professional guidance when needed.

Talk to a Financial Advisor

Whether you're five years away or already retired, working with a professional can help you develop a customized retirement income strategy.

Michael Schimmel, Senior Wealth Advisor with Fellows Financial Group, is available to meet with USSFCU members. Visit ussfcu.org/fas to schedule your complimentary consultation.

This article is for informational purposes only and should not be considered tax, legal, or financial advice. Individual circumstances vary, and you should consult a qualified tax advisor, financial planner, or legal professional to determine what options are best for your specific situation. While we strive to provide accurate and up-to-date information, laws and regulations may change, and we do not guarantee the completeness or accuracy of the content. USSFCU and its representatives do not provide tax or legal advice. Always review your retirement and investment plans with a professional before making any financial decisions.