News reports notwithstanding, people are living longer than ever before. That means many more years of enjoying a well-earned retirement. However, longer lifespans make it critical to carefully manage risk – even after retirement – to ensure you have the funds you need to maintain your lifestyle. These are seven ways you can protect your retirement income from perils like inflation, market volatility, or outliving your savings.

Keep Your Emotions in Check

Every dollar you have stashed away for your retirement years represents hard work. Because of this, many people have strong emotional reactions to dips in the market. They are tempted to protect their funds by reacting to short-term trends instead of sticking to their long-term investment strategy. As hard as it can be, the best thing you can do to manage this risk is to keep an eye on your goals and ignore the daily ups and downs of the markets.

Beware of Overspending

Many factors go into calculating how long your money will last, including your age, life expectancy, current and future rates of return, and the amount you have saved. We can give you an approximate figure for how much you can safely withdraw each year without running out of money.

Design Your Portfolio with Inflation in Mind

One of the most frustrating things about setting money aside is that buying power is eroded by inflation over time. When it comes to your retirement, this issue goes from discouraging to dangerous, as inflation can dramatically decrease the value of your portfolio. Use tried-and-true inflation-proof portfolio management techniques to ensure that your rate of return will – at a minimum – keep up with the cost of maintaining your lifestyle.

Focus on Interest Rates

At one time, interest rates of 5 percent or more were standard. That made it simple to accumulate solid earnings, and interest income could be relied upon for living expenses after retirement. However, those high rates have been gone for a long time now, and who knows when they will reach that level again? In the interim, adjust your portfolio to account for low interest rates and ensure you have enough invested in holdings to generate a better return while taking the least risk.

Plan for Longevity

Most people assume their lifespans will be far shorter than statistics indicate, and they plan for their retirement accordingly. Unfortunately, this trend results in many retirees outliving their savings. The best way to mitigate this risk is to assume a best-case scenario when planning for retirement. Save, invest, and spend as if you will live to be 100 years old. As I always say, “Plan for the worst and expect the best!”

Prepare for Market Changes

The economy goes through regular cycles, and no matter how carefully you invest, you will undoubtedly face a market downturn at some point during your retirement. While this isn’t an issue while you are still in the accumulation phase of life while making contributions to your retirement accounts, it can add complexity during the distribution phase. Over time, with no withdrawals, your investments may eventually recover. However, this can take years. Practically, you cannot avoid all withdrawals during this period, so your overall income strategy must consider this downturn when calculating your annual distribution targets.

Focus on Sequence of Returns

Market changes mean that you will probably have to make withdrawals during a market downturn, which goes against the standard “buy low, sell high” investment wisdom. If this happens early in your retirement, you will likely deplete your savings much more quickly than if it occurs later on. As you decide when to retire, how much to withdraw, and when to begin distributions, keep in mind that taking money out of your investment accounts when the value of your portfolio is down could put you at risk in later years.

Do you have questions about this week’s content or need help with your financial plan? We’re here to help! Simply click here or call (763) 445-2772 to schedule a complimentary consultation today!

Note: This content was updated January 2025.