I often talk about retirement and the challenges retirees face.  There never are a shortage of points that need to be made, but there are in my opinion, 9 main retirement challenges that threaten your cash flow.

Inflation, sequence of returns, unfilled income gaps, market risk, interest rate risks, taxes, long term care expenses, rising health care costs, technology and medical advancements are all real concerns that you need to think about.

These are without a doubt the biggest retirement challenges. If left unchecked they can really cause problems for retirees who have not planned well. This leads me to what I consider a huge threat above all of these threats.  This one threat leaves you exposed to all the rest.  That threat is complacency.

COMPLACENCY: The most overlooked retirement challenge

Complacency can come in many different forms and is the biggest risk to retirees. While all the headwinds I mention are real, they can all be remedied to some degree by having a plan to address the problems.

I have found that complacency is often linked to fearing change, and the fear of making a mistake.  For some, the idea of doing nothing feels like a safe bet, but choosing to make no decision is still making a decision. This can carry the same negative results as making the wrong decision.

Complacency leaves you exposed to lots of potential problems that exist if you don’t have a plan in place.  Without a proactively thought-out plan, you default to a plan that has you reacting to retirement challenges as they arise which is essentially having no plan at all.

Whether you want to deal with them or not, there is no escaping the challenges that you will face in retirement.  The problems are clear and ever- present and not planning for them does not change that fact.

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Making decisions before things happen and positioning yourself for success is what financial planning is all about.  A financial plan will help you proactively manage the headwinds you face and positions you to be prepared for things you know are likely to occur.  Such retirement challenges as:


Inflation will erode your income and assets over time making the money you have worth less requiring more of it to maintain your lifestyle.  The longer you live, the bigger the issue becomes.  This is a slow decay of your purchasing power, which results in less and less income to match your needs.


Sequence of return risk continuously threatens your lifestyle when you are taking withdrawals from your portfolio for retirement.  You have market volatility that can work in your favor at times. However, any time you are taking distributions from an investment account you run the risk of market losses depleting your principle.  This compounding effect can widen the gap between what you have and what you need to live on.  It can result in necessarily having to reduce or stop the distribution you are accustomed to taking and living on.


An income gap forms and is most obvious when your income sources such as social security or a pension do not fully meet your income needs. This is considered a gap between what you need and what you’re receiving.  This can happen while transitioning from a job into retirement or it can develop over time due to other circumstances mentioned. It is critical to have supplemental, reliable income sources to fill this gap and have confidence in the future.


Market risk is always a threat to your money. It can be a difficult variable to plan for unless you are removed from the market all together.  When depending on the market for current income, you run the risk of experiencing losses and depletion of your resources.  And overconfidence in the market being profitable does not change the fact that the market carries risk to your principal.  When the market takes a dive, you are at risk for the possibility of running out of money.  This is not a good thing when you have built your lifestyle around the use of this money.

Sometimes people take on too much risk seeking higher yields to fill the income gap of a lifestyle that is beyond what they can realistically afford. This can work fine in a rising market environment but can result in losing principle if an investment goes south and can ultimately force a lifestyle adjustment to match the income capabilities from your assets.


Interest rates are a risk that too many neglect to understand.  The amount of income you can receive from a fixed investment is directly tied to interest rates.  When interest rates are low, the amount of money you need to fill income gaps increases because you are receiving less income from your money.  We are at historic lows when it comes to interest rates. I don’t see that changing any time soon due to government debt being where it is.  This forces many people to seek out higher yields, which comes with higher risk to your principle.

  1. TAXES

Taxes are one of the biggest issues for retirees. Many people have deferred their tax liability while they were saving in 401k plans until they retired.  This creates many problems when it comes to planning for retirement since future tax rates are unknown, and required minimum distributions can force liquidation of certain investments whether you need the income or not.  Tax planning is a huge part of planning your overall income strategy for retirement.


Long-term care is a subject that still carries confusion about whether it is a real concern.  This type of care is required when you are unable to care for yourself any longer.  This may be a caregiver at your home, continuous care in a nursing home or some variation in-between.  I have seen costs reach as much as $10,000 per month. This can drain assets and place significant pressure on a spouse.

When I speak with people who have seen parents or grandparents require care, they are often quick to want to take steps to cover themselves.  Meanwhile, those who have not had to deal with these exorbitant health care costs may question if they need it.  The fact is, long-term care needs to be discussed and a plan put in place.


Health care costs are continuously on the rise. The issue has become a political football making the coverage’s, costs and plans uncertain going forward.  Medicare is in place for anyone over the age of 65 (though they are discussing raising the age of this program).  However, this program does not cover all expenses and needs.  Depending on the doctors you see, medications you take and the level of care you expect, supplements and income planning fills the gap with covering medical expenses.


Technology and medical advancements may not seem like a potential financial problem, but they certainty are when you consider that these things can extend life.  More and more advancements in the medical field are extending mortality, which in turn requires income for more years.  It is said that life is being extended but quality of life has not necessarily caught up.  The later years of life may come with added medical expenses coupled with the need for long-term care.

All of these retirement challenges are manageable if planned for. However, thinking you can do nothing and float through retirement is setting yourself up for a disaster.

How Retirement Challenges Can Affect You

It’s not uncommon for people who share their stories with me to learn that they didn’t recognize these problems early enough. Many simply feared making the wrong decision, so they chose to do nothing.  They now may have to reduce lifestyle, acquire debt to supplement their income, or sell off physical assets to live with relatives.

Not developing a plan for yourself to address potential retirement challenges is a gamble, that you may later wish you had done something about.  There is more at stake than just avoiding a decision or thinking no decision is better than the wrong decision.

I see this most often with people with 401k’s who fear making changes since they have accumulated this money over a long period of time. Moving or reallocating the money is too much emotionally to handle.  The idea of using the money to fill a plan for themselves is overshadowed by the fear of change.

I also see it with people who have very large sums of money sitting in bank accounts. They have the money there for no other reason other than the fact that they like the feeling of seeing the balance when they login to the account.  They know in their mind that they probably have too much sitting making little if no return, but the idea of change is often too much for some people to handle.

Optimistic investors who have recency bias or a belief that the market will always go up tend to rely more on returns and yields to drive decisions for how they position their money.  They are willing to expose themselves to high levels of risk with a belief that the market will always work itself out over time.

The one thing that is common between the majority of these cases is that they are not yet retired. They are often still working and don’t always see the necessity of making changes to prepare for retirement. I believe this stems from the simple fact that they have an income they rely on to support their cashflow and the money they have or are saving is on the sidelines for the future.

I want you to think about the most successful people that you know.  Maybe it is a friend or relative.  Maybe it is someone at your church or in your community.

Now, what do you believe they have done to get to where they are?

What I have found working with successful people is that they have a desire to make the right decision regardless of what they have done in the past. Here’s what they have in common:

  • They welcome change when it means moving closer to their goals and protecting their family.
  • They take the time to go through a financial planning process to learn about potential threats to their retirement and are proactive about addressing retirement challenges.
  • They are action takers and don’t get too caught up in the emotional roadblocks of making decisions for themselves.

Is your retirement plan ready for the challenges ahead?

Have you been complacent but now realize that you want to make a change? Are you willing to make changes to prepare for retirement challenges but just need guidance in these areas?

I want to encourage you to take advantage of an opportunity to reach out to my team to see if we may be able to offer some guidance for you.  Just because you have done things a certain way up to this point doesn’t mean you have to continue to do things that way.  Change can happen at any time and sometimes small tweaks can make a huge difference.

Hope You Take Advantage!