Five threats to a secure retirement

Feb 17th, 2021 | By | Category: Personal Finance/Consumers

Recent studies and surveys show that pre-retirees and retirees fear the following five threats to their retirement finances most — and with good reason.

  1. Outliving your money.

The average 65-year-old will outlive their savings by almost a decade, according to a recent study by the World Economic Forum. To determine how much money you’ll need to have saved by the time you retire, a good guideline is the “Rule of 25,” which says you should multiply your total annual expenses by 25. By that measure, to have $100,000 per year (don’t forget to adjust for inflation) to spend in retirement, you’ll need to save $2.5 million. It’s also important to consider that you may live longer than you imagine; studies show people tend to underestimate their life expectancy.

  1. Market risk.

If, like most people, you have a big portion of your assets in stock market investments and the market falls as you’re nearing or already in retirement, it will have a devastating impact on how much you can withdraw each year. You’ll be forced to cut back significantly on your retirement lifestyle, and/or you’ll have to work longer than you planned – possibly much longer.

  1. Tax risk.

If you’re saving in tax-deferred accounts like 401(k)s, IRAs, and 403(b)s, you have no clue what your tax bill will be when you start taking withdrawals during retirement that could last 20 or 30 years. According to the Center for Retirement Research, after the IRS takes its cut, it’s a very big deal when people realize they only have two-thirds or three-quarters of what they thought they had. And that assumes tax rates don’t increase long-term.

  1. Healthcare costs not covered by Medicare.

Even healthy 65-year-old couples face $500,000-plus in healthcare costs they will have to cover out of their own pockets (source: Fidelity and Genworth studies).

  1. Policy changes.

These may include cuts to Social Security benefits and increases in the taxes retirees must pay on their benefits.

To bypass all of these risks, I recommend a wealth-building strategy of:

  • Guaranteed, predictable growth and retirement income.
  • Funds can be accessed tax-free, under current tax law.
  • Income from plans doesn’t cause your Social Security benefits to be taxed and doesn’t hike your Medicare premiums, unlike 401(k) and IRA withdrawals.
  • Guaranteed lifetime income options to ensure you won’t outlive your money. Can be structured to provide money to cover costs of care for chronic and terminal illnesses.


Pamela Yellen, who wrote this article, is the founder of Bank On Yourself ( and the author of two New York Times best-selling books.