Managing Risk in Retirement: What Most Advisors Miss

The transition from earning to spending during retirement marks one of the most significant financial shifts in a person’s life. After years of diligently accumulating a nest egg, retirees are now tasked with protecting their hard-earned wealth while drawing income amid uncertainty. Unfortunately, many retirement plans focus heavily on average returns and accumulation metrics, overlooking the complex and evolving risks that retirees face once their paychecks stop.

A retirement plan that fails to account for market risk, longevity risk, healthcare expenses, and the rising cost of living leaves retirees vulnerable to outcomes that can significantly diminish their quality of life. Managing these risks requires more than portfolio diversification—it demands a strategic, long-term approach led by a fiduciary financial advisor who understands the nuances of retirement income planning.

At Holland Capital, we believe that a successful retirement is defined not only by financial security, but also by confidence—the assurance that you can weather unexpected expenses, market volatility, or the death of a spouse without jeopardizing your long-term goals. In this article, we break down the most overlooked retirement risks and the strategies to mitigate them.

The Key Risks Most Retirees Underestimate

Longevity Risk: Living Longer Than Expected

People are living longer than ever, with many retirees expected to spend 25 to 35 years in retirement. While increased life expectancy is a blessing, it introduces the risk of outliving your retirement savings. Traditional financial models often underestimate the duration retirees will need income, leaving coverage gaps and misaligned asset allocation.

Mitigating longevity risk requires a plan that accounts for variable spending, ongoing inflation, and health-related costs that often increase with age. At Holland Capital, we design income strategies that are tested against long-term projections and stress scenarios to support sustainable income streams even as life extends beyond statistical averages.

Sequence of Returns Risk: Market Volatility in the Early Years

While the market may deliver a solid historical average return over decades, the sequence of those returns matters significantly in retirement. Poor investment returns in the early years of retirement, especially during periods of large withdrawals, can compound the negative impact on portfolio longevity. This is known as the sequence-of-returns risk.

To counteract this, we work with clients to segment their retirement assets into time-based buckets: one for short-term income needs (cash and bonds), one for mid-term growth (balanced portfolios), and one for long-term appreciation (equities). This structure reduces the need to sell volatile assets during downturns, enabling the investment portfolio to recover in favorable market conditions.

Inflation and Purchasing Power Risk

Even modest inflation erodes the purchasing power of your money over time. For a retiree living 25 years post-retirement, a 3% annual inflation rate effectively halves the value of their income. The costs of healthcare, real estate, and essential services can rise faster than general inflation, placing a strain on fixed-income portfolios.

At Holland Capital, we incorporate inflation hedges into every retirement income plan. This may include exposure to growth-oriented assets, Treasury Inflation-Protected Securities (TIPS), and strategically timed Roth conversions to manage future taxable income. By balancing risk tolerance with forward-looking planning, we help preserve purchasing power across a whole retirement horizon.

Rising Health Care Costs and Long-Term Care

One of the most underestimated retirement risks is the rising cost of health care, particularly long-term care services. Medicare only covers a portion of expenses, and costs for Medicare Part B, supplemental insurance, and long-term care facilities can increase significantly with age and the presence of chronic conditions.

To address this, we incorporate life insurance, long-term care planning, and dedicated health care savings targets into every retirement plan. Our models consider a range of scenarios, including one spouse requiring assisted living while the other remains at home. This approach is intended to reduce the risk of financial dislocation and support independence during vulnerable life stages.

What Most Advisors Miss in Retirement Risk Management

One-Dimensional Risk Assessments

Too often, risk tolerance assessments focus only on investment preferences without addressing the retiree’s broader financial situation. A portfolio that feels “safe” on paper may leave retirees exposed to cash flow shortfalls, untimely withdrawals, or excessive tax burdens.

At Holland Capital, we go beyond risk profiling by integrating spending needs, asset location, taxable income, and personal preferences. We create tailored asset allocation strategies that consider all dimensions of risk, including volatility, inflation, family legacy, and liquidity.

Lack of Coordination Between Income Sources

Many plans treat Social Security, pensions, Roth IRAs, and taxable accounts in isolation, ignoring the synergistic value of proper sequencing and integration. The timing of Social Security benefits, in particular, significantly affects longevity protection and spousal security.

Our retirement income strategies coordinate Roth conversions, Social Security filing, and drawdown plans from different account types. This integrated model enables clients to optimize their lifetime income, reduce taxes, and enhance retirement security.

Failure to Plan for the Death of a Spouse

The death of a spouse can cause a sudden drop in household income, from reduced Social Security or pension benefits, while fixed expenses remain. Many retirees also transition into a less favorable tax filing status, resulting in higher tax rates on the same level of income.

At Holland Capital, we proactively test how a retirement plan performs after a spouse’s death. We examine the income gap, evaluate survivors’ needs, and ensure a structure is in place to provide continued financial security, leveraging life insurance policies and strategic beneficiary planning.

Building a Resilient Retirement Plan

Asset Allocation with Purpose

Proper diversification means aligning investments not just with risk tolerance, but with retirement goals, income timelines, and lifestyle needs. A retiree in their mid-60s may need a different asset allocation than one in their early 80s.

We design portfolios that segment assets by purpose, protect against drawdown risks, and ensure that each dollar serves a role—whether for income, growth, or liquidity. By combining modern portfolio theory with real-world retirement scenarios, we develop planning frameworks that adapt over time.

Planning for Flexibility and Life Events

No one can predict the future. However, we can build flexibility into your plan so that when life happens—whether it’s a healthcare emergency, market downturn, or a change in retirement age—you don’t have to panic.

At Holland Capital, we review our plans annually and make adjustments as needed to reflect changing needs and economic conditions. Our goal is to provide clients with a framework that strikes a balance between risk and reward and between control and freedom.

Conclusion

Managing risk in retirement is about more than managing investments—it’s about creating a multi-dimensional strategy that evolves with your life. Unlike your working years, retirement brings unpredictable factors—longevity, inflation, health events, tax legislation, market cycles, and personal transitions. Ignoring any one of these can jeopardize the stability of your income and the durability of your plan.

A retirement strategy must address all these areas simultaneously. This involves mapping out retirement income needs over time, accounting for inflation in both discretionary and non-discretionary expenses, and preparing for potential healthcare expenses. It means developing a plan that provides enough liquidity for emergencies while preserving long-term growth opportunities through well-aligned asset allocation. Most importantly, it means planning for the people who depend on you, including your spouse and legacy beneficiaries.

At Holland Capital, our approach to retirement planning is comprehensive, personalized, and grounded in the fiduciary standard. We analyze risk factors specific to each household and construct plans that aren’t built solely around averages, but around your real-life goals and priorities. With decades of retirement ahead, the proper guidance now can mean the difference between uncertainty and clarity for years to come.

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