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Let me start with a simple question—what’s the biggest risk to your retirement?
Most people don’t hesitate: “the market.” And that makes sense. Market drops are visible. You can see them in real time. They show up on the news, in your account, and in conversations with friends. It feels like risk because it’s right in front of you. But what feels like risk and what actually causes problems in retirement are often two very different things.
Market volatility is loud, but it’s temporary. We’ve seen this over and over again. Markets decline, sometimes sharply, and then recover and move higher over time. That pattern has held through recessions, wars, inflation spikes, and everything in between. What doesn’t get nearly as much attention is inflation. Inflation is quiet. It doesn’t show up all at once, but it’s always there, steadily pushing your cost of living higher. Over a 25- or 30-year retirement, that slow increase can create far more pressure than a temporary market decline.
If inflation averages around 3%, your cost of living will roughly double over the next 20–25 years. A $60,000 lifestyle today may require closer to $120,000 later just to maintain the same standard of living. Nothing extra—just keeping pace. That leads to a more important question: is your portfolio built to keep up? If your investments are too conservative and not growing, withdrawals are coming from assets that are losing purchasing power each year. Over time, that becomes increasingly difficult to sustain.
This is where the idea of “playing it safe” needs to be reconsidered. Bonds are often viewed as safe because they don’t fluctuate as much. Stocks are seen as risky because they do. That distinction matters in the short term, but retirement isn’t a short-term exercise. It’s a multi-decade period where growth still matters. Historically, stocks have returned around 10% annually, while bonds have been closer to 6%. After inflation, the gap becomes even more meaningful—roughly 7% real return for equities versus about 3% for bonds. That difference compounds over time and plays a major role in whether a portfolio keeps up with rising costs or slowly falls behind.
Income tells a similar story. Bond interest is fixed. A dollar of income today remains a dollar years from now, even as expenses rise. Equity income, through dividends, has tended to grow over time. Not every year, and not in a straight line, but consistently enough to matter. For retirees, that growth helps offset increasing living costs in a way fixed income alone cannot.
From a portfolio standpoint, this is why most retirees shouldn’t abandon equities altogether. A common mistake is shifting too heavily into bonds at retirement in an effort to reduce volatility. While that may feel more comfortable in the short run, it can introduce a different kind of risk over time. A more balanced approach—often something in the range of 60-80% equities, depending on the individual—can provide both growth and stability. Bonds still serve an important purpose, offering liquidity and helping manage short-term needs, but they are not designed to carry the full burden of a long retirement.
Withdrawals also need to be viewed through this lens. A reasonable withdrawal rate—typically around 4% to 5%, adjusted over time—has historically worked well when paired with a portfolio that continues to grow. That assumption is important. Without growth, even conservative withdrawal rates can become unsustainable, particularly as inflation pushes spending higher.
At the end of the day, the biggest risk in retirement usually isn’t a market decline. It’s being too conservative for too long. A portfolio that doesn’t grow may struggle to keep up with inflation, and that gap tends to widen over time.
Market risk is easy to see and often uncomfortable in the moment. Inflation is less visible, but far more persistent. Over a long retirement, it is usually the quieter risk that has the greater impact.
Disclosure: Past performance is not a guarantee of future results. This material should not be considered personal financial advice.
