Home » The Four Headwinds of Retirement and How to Combat Them

The Four Headwinds of Retirement and How to Combat Them

Dipping your toes in the fresh waters of an exotic beach. Enjoying a gorgeous sunset and your favorite drink as you relax on the back patio. Getting lost in a painting because you have all the time in the world to perfect every brushstroke. Spending more time with family and friends.

These are the types of things you dream of indulging in when you retire. You don’t picture worrying about how much money you have in the bank or trying to find a job because it turns out you don’t have enough savings to last throughout your retirement. When the final curtain call of your working life arrives, you want to have financial stability and total peace of mind.

That’s why, in addition to properly saving and investing, it’s crucial for you to be aware of the potential obstacles that could threaten your financial security; some are within your control, and some are not. These obstacles, also known as the headwinds of retirement, must be top of mind as you plan for life after work. Awareness and proper planning are paramount for facing these challenges head-on and setting yourself up for retirement success.

Longevity risk

When it comes to planning for retirement, you might not realize that living a long life is part of the risk of retirement. Now, you might be thinking to yourself, “Don’t we all want to live longer? Isn’t that the whole point!?” Of course, the answer would be yes. A life of longevity is a wonderful thing, but it can actually become a headwind in retirement if you don’t have enough money to carry you through your last days.

For example, let’s say you retire at age 65 and live until you’re 95. That means your savings need to last 30 years! For most, that’s a long, fulfilling life, but very few people think about the financial implications of longevity.

Outliving your retirement funds is a much stronger possibility in today’s day and age because life expectancy has increased over the past 80 years and is projected to continue growing. A factor that’s further exacerbating this headwind is the fact that people can no longer count on pensions and Social Security funds to provide a foundation for their retirement. Social Security trust funds are going to be reduced by 2033. Pensions have become a thing of the past thanks to the Revenue Act of 1978, which allowed companies to offer 401(k) plans, shifting the responsibility of saving for retirement primarily from the employer to the employee.

How to combat this headwind: There are tangible actions you can take to reduce longevity risk. For example, you can delay your Social Security benefits. Instead of claiming your benefits as soon as you turn 62, you can avoid a permanent reduction of benefits by up to 30% if you wait until you’re 66 or 67. If you wait until you’re 70, you can receive a delayed retirement credit of as much as 8%.


Another headwind on your path to retirement is the ever-increasing cost of living. Inflation has always been a concern for retirees, and over the last few years, the price of everyday goods and services has skyrocketed. A common mistake when saving for retirement is to plan for how much things cost today rather than what they’ll cost in the future. You don’t know what the inflation rate will be when you retire.

Think of the people who were nearing or entering retirement in 2022, especially right around the middle of the year when inflation surged to 9.1% as a result of a tightening job market and global economic uncertainty. Many found themselves stretched thin financially because they ended up paying way more for goods and services than they anticipated in the years leading up to retirement. Even with inflation dropping to 3.1% in November, prices are still higher than most of us would like, putting a strain on people who are nearing or stepping into retirement.

How to combat this headwind: You can save with a higher cost of living in mind. Assume that your everyday expenses will be higher in retirement than what you’re currently facing.

Market volatility

The stock market, with all of its ups and downs, can have a significant impact on your financial stability in retirement. You can never say for certain what’s going to happen today, tomorrow or next year, much less what will be happening when you reach retirement age. Stock market prices are volatile, and if you end up in a situation where you need money, you might have no choice but to sell when the market is down, which is the opposite of what you want to do.

Ideally, you want to buy low and sell high. Sequence of returns risk is also a variable that can cause people to lose money, especially if the timing is bad. For example, if you retired with $1 million right before the COVID-19 pandemic, you immediately saw a market downturn of 20%. Suddenly, your $1 million is worth considerably less than you originally planned for.

It’s also important to understand that geopolitical events affect the retirement landscape. The U.S. is trying to fund two wars right now, and we’ve just entered an election year, two things that can impact how people plan for retirement. These factors add an additional wrinkle when building an investment portfolio with the proper mix of growth and safety. This alone affects the market and the fourth retirement headwind — taxes!

How to combat this headwind: Combating market volatility is tricky, because it fluctuates so often. Diversifying your portfolio and exercising caution around withdrawals are two general pieces of advice to keep in mind. Identify specific reasons for each of your retirement accounts. Don’t simply dump all your money into one account or spread your money into a bunch of different accounts without a clear reason. Designate a specific purpose for each account and be clear on what unique purpose each account serves. A financial adviser can provide an assessment of your unique financial situation to help determine an asset distribution plan that best aligns with your age and investment goals.


Taxes are always a consideration when it comes to how your retirement funding can be impacted. Most people have been told they’ll be in a lower income tax bracket when they retire; therefore, they should defer taxes until they’re in a lower tax bracket in retirement.

This is not necessarily true, because the tax situation in our country is always changing, due in part to our national debt, which is more than $33 trillion, according to the Treasury Department. And when our country is in debt, the tax rate will change because the only way to increase revenue is to raise taxes.

So those saving for retirement might defer all their taxes now only to find out that they’ll pay more in taxes when they start pulling funds from their retirement accounts.

How to combat this headwind: You can reduce your tax liability in retirement with several strategies. Simply understanding your tax bracket can make a difference. Is your income getting taxed at 22% or 32%? You’d be surprised by how many people aren’t familiar with their tax situation and don’t know which income tax bracket they fall into.

It’s also important to think realistically about what bracket you’ll be in when you retire. You might realize you’re right at the edge of a tax bracket and therefore, by withdrawing just a little bit less from your taxable accounts, you can remain in a lower tax bracket and reduce your tax bill.

When it comes to retirement planning, a financial adviser can help you craft a plan and a strategy that will allow you to enjoy the lifestyle you desire with total peace of mind.

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