Understanding the different types of risk

When planning for retirement, it’s important to recognize that “risk” isn’t just one thing. Here are some of the main types of risk that can affect your retirement savings and income:

• Market risk (systematic risk): The possibility that investments will lose value due to overall market declines. This is the risk most people think of when they see their portfolio fluctuate with the stock market.
• Inflation risk: The chance that the rising cost of living will erode the purchasing power of your savings, especially if your investments don’t keep pace with inflation.
• Longevity risk: The risk of outliving your savings. As people live longer, retirement funds may need to last for decades.
• Interest rate risk: The risk that changes in interest rates will negatively affect the value of your fixed-income investments, such as bonds.
• Sequence of returns risk: The danger that poor investment returns in the early years of retirement, when you’re making withdrawals, could accelerate the depletion of your savings.
• Liquidity risk: The risk that you won’t be able to access your money quickly without selling investments at a loss, especially in emergencies.
• Health and unexpected expense risk: The possibility that unforeseen medical costs, home repairs, or family emergencies will require unplanned withdrawals from your portfolio.

Understanding these different types of risk can help you build a more resilient retirement plan—one that’s prepared for both expected and unexpected challenges.

How risk shifts as you near retirement

Risk doesn’t disappear once you stop working—instead, it changes form. Market fluctuations that once felt manageable can have a much greater impact when you depend on your portfolio for income. For example, a downturn early in retirement can accelerate the depletion of your savings. Inflation may erode the purchasing power of fixed or conservative investments. Longer lifespans mean your savings may need to last longer than previous generations anticipated. Additionally, unexpected expenses such as medical needs, home repairs, or family emergencies can force unplanned withdrawals.

These factors underscore why risk management becomes even more important as you transition into retirement. It’s not just about protecting your investments—it’s about safeguarding the retirement lifestyle you’ve worked toward.

Strategies to help manage risk over time

Managing risk doesn’t mean avoiding it altogether. Instead, it’s about finding the right balance for your goals, timeline, and comfort level. As retirement approaches, many people gradually shift their portfolios—combining investments aimed at long-term growth with more stable assets to help preserve what they’ve built.

Diversification is an important risk management strategy: by spreading your money across a mix of short-term safety assets, income-producing options, and long-term growth opportunities, you can help cushion your retirement plan against market swings. However, it’s important to remember that diversification does not eliminate the risks of investing.

Your withdrawal strategy matters, too. Whether you draw from taxable accounts first, use a proportional approach, or adopt a “bucket” method designed for short-, medium-, and long-term needs, the goal is to create a steady, sustainable flow of income. Some retirees also incorporate guaranteed or stable income solutions to reduce their reliance on the market and bring more predictability to their plan.

Finally, your risk approach shouldn’t stay static. As life changes, markets shift, and goals evolve, checking in on your plan periodically helps ensure your investments and income strategy continue to support your long-term needs.

Finding the balance that fits you

There’s no universal formula for choosing the right level of risk. The best approach depends on your retirement timeline, income sources, lifestyle expectations, and personal comfort with market fluctuations. Some people prefer the reassurance of steady, predictable income, while others are comfortable with more volatility in pursuit of higher long-term returns. What matters most is selecting a strategy that gives you confidence in both strong and challenging markets.

Ultimately, managing risk is about more than numbers—it affects your day-to-day comfort, your peace of mind during market downturns, and your readiness for the unexpected. A thoughtful, flexible strategy can help your retirement savings last and allow you to enjoy the life you’ve planned.

If you’d like help tailoring a risk approach to your specific needs, a financial professional can guide you through the options and help you build a plan aligned with your goals.

This material is general in nature and is being provided for informational purposes only. It was not prepared, and is not intended, to address the needs, circumstances and/or objectives of any specific individual or group of individuals. New York Life and its affiliates are not making a recommendation to purchase any specific products. For advice regarding your personal circumstances, you should consult with your own independent financial and tax professionals.