Why Risk Isn’t Just About the Stock Market

When most people think about financial risk, they immediately picture the stock market. While market volatility is a significant concern, it’s far from the only factor that can disrupt a retirement plan. Unexpected healthcare costs, tax policy changes, inflation, and longevity risk all pose threats to long-term financial stability.

By focusing only on investment risk, investors may leave themselves exposed to other financial challenges that can erode wealth just as quickly—if not more so—than a downturn in the market. Let’s explore the key financial risks beyond the stock market and strategies to help mitigate them.

1. Tax Risk: Potential Changes in Tax Rates May Impact Retirement Income

One of the most overlooked financial risks is the potential for rising tax rates. Many investors assume they will be in a lower tax bracket in retirement, but this may not be the case if tax laws change or if Required Minimum Distributions (RMDs) push them into higher income brackets.

Key Considerations:

The U.S. national debt and future government spending could lead to higher tax rates.

Tax-deferred accounts like traditional 401(k)s and IRAs will be taxed upon withdrawal.

Roth conversions and tax-efficient withdrawal strategies can help mitigate future tax burdens.

Diversifying retirement savings across taxable, tax-deferred, and tax-free accounts can provide flexibility and help manage potential tax risk.

2. Longevity Risk: Outliving Your Savings

People are living longer than ever, and while longevity is a blessing, it can also be a financial challenge. Many retirement plans assume a set number of years, but if retirees live well beyond their projections, they may deplete their assets too soon.

Ways to Address Longevity Risk:

Creating a structured withdrawal strategy that accounts for extended life expectancy.

Using guaranteed income solutions such as Fixed Indexed Annuities (FIAs) to provide steady cash flow.

Adjusting investment allocations over time to support long-term income needs.

3. Healthcare and Long-Term Care Costs

Medical expenses represent one of the largest financial risks for retirees. A significant health event or the need for long-term care can quickly drain savings if not properly planned for.

Key Statistics:

The average cost of assisted living or nursing home care can exceed $100,000 per year.

Traditional health insurance and Medicare may not cover all long-term care needs.

Risk Mitigation Strategies:

Health Savings Accounts (HSAs) can be a tax-efficient way to prepare for medical expenses.

Indexed Universal Life (IUL) policies with long-term care riders can help cover healthcare costs while preserving other assets.

Planning for long-term care needs early can help protect retirement savings.

4. Inflation Risk: The Potential Impact on Buying Power

Inflation quietly reduces the purchasing power of money over time. While historical inflation rates have averaged around 3%, certain expenses—such as healthcare—have increased at much higher rates.

How to Address Inflation Risk:

Consider investment strategies that account for inflation-adjusted returns.

Use inflation-adjusted income sources, such as Social Security or annuities with cost-of-living adjustments.

Keep a portion of assets in growth-oriented investments to maintain purchasing power.

5. Interest Rate Risk and Fixed Income Challenges

Many retirees rely on bonds and fixed-income investments for stability, but interest rate fluctuations can impact their returns. Rising interest rates may reduce bond values, while low rates can make it difficult to generate sufficient income.

Strategies to Address Interest Rate Risk:

Diversify income sources beyond traditional bonds.

Consider using Fixed Indexed Annuities (FIAs) as a potential strategy for income stability, which may be less affected by interest rate changes.

Maintain flexibility in asset allocation to adjust for economic changes.

Building a Holistic Risk Management Plan

Since financial risks beyond the stock market can significantly impact long-term wealth, it’s essential to build a strategy that addresses all aspects of financial stability.

Steps to Take:

Diversify income sources to balance market-based and guaranteed income.

Utilize tax-efficient planning to minimize future tax liabilities.

Prepare for healthcare and long-term care needs early.

Regularly review and adjust financial strategies as personal circumstances change.

Planning for Financial Risks Beyond the Stock Market

A comprehensive financial plan considers more than just market fluctuations. Addressing tax risk, longevity risk, healthcare costs, inflation, and interest rate fluctuations can help create a more resilient retirement strategy.

Hanson Wealth Management specializes in tailored financial planning that helps clients prepare for these risks. Contact us today to discuss how you can build a financial plan that accounts for more than just market performance.

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Top 5 Financial Myths Perpetuated by Mainstream Gurus

Mainstream financial gurus have built massive followings by offering simplified, easy-to-digest advice on personal finance, investing, and retirement planning. While their guidance may work for some, it often promotes a one-size-fits-all approach that overlooks critical financial nuances. The truth is, some of the most commonly accepted financial myths from mainstream financial gurus can be misleading—or even harmful—to those with more complex financial needs. Let’s take a closer look at five financial myths that are widely accepted but don’t always hold up when applied to real-world financial planning.

Why Personalized Financial Planning Outperforms Generic Advice

Financial planning is not a one-size-fits-all process. Yet, many investors rely on generic advice that may not align with their specific goals, risk tolerance, or tax situation. While broad financial guidelines can provide a starting point, they often fail to address the nuances of individual circumstances. Personalized financial planning strategies focus on aligning financial decisions with an investor’s unique needs, providing a tailored approach to managing wealth.

Case Studies: When Following the Crowd Doesn’t Pay Off

Many investors follow conventional financial wisdom, trusting broad, one-size-fits-all guidance to navigate their financial future. While these general recommendations may seem practical, they often overlook personal factors such as risk tolerance, tax implications, and long-term financial objectives. The risks of following generic financial advice can be significant, leading to avoidable missteps that impact retirement savings, tax efficiency, and wealth preservation. Through real-world case studies, we explore instances where individuals followed standard financial advice—only to find themselves facing unexpected challenges. More importantly, we’ll highlight how personalized financial strategies could have helped them avoid these pitfalls.

The Hidden Cost of Following the Crowd in Financial Planning

Financial advice is everywhere—from news outlets to social media influencers to friends and family. While many people believe that following widely accepted guidance is a safe approach, it’s important to consider that these strategies may not align with your unique financial situation. The hidden cost of following the crowd in financial planning can be significant, potentially leading to unnecessary taxes, overlooked risks, and missed opportunities for long-term financial stability.

Why Generic Financial Advice Often Misses the Mark

Many people seeking financial guidance turn to general advice found online, from books, or through media personalities. While these broad strategies can offer a starting point, they often fail to address the complexities of individual financial situations. Generic advice may overlook key factors such as tax planning, income strategies, and market risk—all of which play a crucial role in shaping a sustainable retirement plan. Understanding why generic financial advice often misses the mark can help investors make informed decisions that better align with their long-term financial objectives.

Avoiding the Greatest Retirement Risks: Part One

My mission as a financial advisor is to help each client build a retirement strategy that’s designed to navigate key financial risks. Many people face the very real possibility of running out of money later in life, often due to factors they didn’t anticipate. That’s why I’ve focused my practice on tax-efficient retirement planning, guided by the principles of David McKnight, author of The Power of Zero and a leading voice in tax-free income strategies. His approach has shaped how I help clients prepare for the future with clarity and purpose. Below, I’m sharing a brief passage from David […]