Many people work for several decades before they can retire. Portfolios compound, earnings go up and people look toward the finish line as motivation to continue the race. Retirement is a marathon, not a sprint, but a few curveballs can catch some retirees by surprise.
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Often, boomers end up depleting their portfolios much sooner than expected. Proven models like the 4% withdrawal rule can go out of the window, and leave you vulnerable if you aren’t careful. Below, we’ll detail some of the risks to keep in mind as you plan for retirement.
Rising Inflation
It’s easy to forget about inflation surpassing the 4% withdrawal rule before retiring. However, some people get caught by surprise regarding how much costs go up over time. High inflation is an issue, and it can erode your nest egg if you aren’t careful.
Boomers may want to prolong their retirement so they have bigger nest eggs. A low-stress remote side hustle can also be a viable option. This income stream lets you generate more money while still enjoying the retirement lifestyle.
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Market Volatility
Market volatility is another curveball to watch. While many boomers reduce their risk when they retire, it’s possible for the market to experience a sharp correction right before you retire. It could be even worse if the market plummets shortly after you retire.
The 4% withdrawal rule assumes your portfolio will go up by at least 4% per year. While that has historically held true, some years have been disappointing. For instance, the S&P 500 lost 19.4% of its value in 2022. High inflation and frequent interest rate hikes made it a difficult environment for investors.
It’s hard to predict how the stock market will move next. However, you can anticipate downward market swings by investing in assets with less risk. Mature dividend-paying companies don’t get hurt as much during corrections as high-growth small-cap stocks.
Long-Term Care Needs
As you get older, you may need help doing basic things like laundry and going to the bathroom. Some boomers have to turn to expensive long-term care service providers when they are older. They may have to resort to assisted living homes if a sibling or child won’t take care of them at home.
Long-term care costs can exceed a college tuition, and some people pay more than $10,000 per month for this service. Sadly, it’s often necessary for those who can’t perform basic tasks and take care of a home on their own.
A Forced Retirement
The ongoing theme for dealing with retirement curveballs is to work a little longer so your money has more time to compound. Working additional years also lets you put more earnings into various assets.
However, some people don’t have that option. If you incur a workplace injury in a hard-labor job, you won’t be able to perform the same tasks anymore. While you may receive workers’ compensation, you will have fewer ways to generate additional income.
You may have to pursue new career paths that let you work remotely. This retirement curveball primarily applies to people who do hard labor. Talk show hosts and video editors, for example, can work forever since these aren’t physically intensive jobs. It’s important for anyone to build an emergency savings account, but this common financial tactic holds extra weight for people in hard-labor jobs who are approaching their 50s and 60s.
You never know when or if your body may no longer be able to perform that type of work. Workers should prepare for the worst (yet hope for the best).
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This article originally appeared on GOBankingRates.com: 4 Retirement Curveballs Boomers Should Prepare for in 2026
