The 5 big risks that shape retirement
“You can’t assume anything based on account size alone. Instead of giving blanket answers, I try to ask the right questions,” Davin says. Those questions often fall into 5 essential categories.
1. Longevity: How long does your money need to last?
Living longer is a gift—but it stretches your finances. Depending on your health and family history, it may make sense to plan for a retirement that lasts well into your 90s.
2. Inflation: Can your savings keep up with rising prices?
After several years of elevated inflation, more than a third of Americans (37%) say rising prices are one of the biggest challenges in preparing for retirement, according to Fidelity’s survey.1 That concern is well founded—higher prices can stretch budgets and increase the amount your savings must cover over time.
3. Health care costs: Medicare? Retiree benefits? Paying out of pocket?
Health care is one of the biggest unknowns in retirement.
A person retiring in 2025 may need $172,500, on average, in after-tax savings to cover health care in retirement.2 That excludes long-term care, which can dramatically increase costs if not insured. Watch or listen to Money Unscripted: What is long-term care insurance?
Most Americans become eligible for Medicare at age 65, but retirees still face premiums, cost-sharing, prescription costs, and potential long-term care needs. Read Fidelity Viewpoints: How to plan for rising health care costs
4. Withdrawal rate: Is it sustainable?
A sustainable withdrawal rate is often estimated at 4% to 5%, with annual inflation adjustments—assuming a typical 30-year retirement.
“If you withdraw 4% from $1 million, that’s $40,000 a year,” Davin explains. “Is that enough? Maybe—if you have a pension or other income. But if you need more than that, you may shorten the sustainability of your savings.”
Fidelity suggests that people planning very long retirements—such as early retirees—consider lower withdrawal rates, around 3%. Read Fidelity Viewpoints: How to retire early in 8 steps
5. Investments: Are you positioned for growth potential?
Guaranteed income sources—pensions, Social Security, annuities—can provide a stable foundation. Fidelity generally suggests covering essential expenses with guaranteed income and using portfolio withdrawals for discretionary spending. Read Fidelity Viewpoints: Understanding annuities
“Sometimes you take part of that million and put it toward something guaranteed that covers essential expenses, so you’re not relying on the market for necessities,” Davin says. “The rest can stay invested for long-term growth or discretionary spending.”
This balance can provide confidence and reduce the risk of outliving your money.
Behavior matters too. “Some of our best savers become our most hesitant spenders because they’re afraid to draw down their accounts,” Davin adds. “Having a plan—automated withdrawals, professional management—helps a lot.”