If you ask most people what they need to retire comfortably, they'd probably say "a lot of money." While there's no denying that that's an important part, it takes more than dollars to remain financially secure for decades on a fixed income. You also need the right investments, insurance coverage, and strategies.
You can't be sure what retirement will bring, so you must prepare for many possible challenges. The smartest retirees ensure they have a plan to address the following three things, allowing them to respond effectively if necessary.
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1. Outliving their savings
Outliving your retirement savings is one of the most common retirement-related fears, and it's easy to see why. If you aren't able to save enough for retirement, you might find yourself unable to afford basic living expenses or else remaining in the workforce longer than you'd initially planned.
Continuing to work at least part-time in retirement is a good strategy to mitigate this risk if you're physically able to do so, but it may not be your only option. You might be able to get more out of Social Security by delaying your application a few months or a few years. Every month you wait to sign up increases your checks a little until you qualify for your largest benefit at 70.
You could also consider investing in annuities. These can help you defer taxes on earnings and enjoy guaranteed income in retirement.
Or try dividend stocks. These typically provide quarterly dividends to shareholders. These payments aren't guaranteed, but there are companies like the Dividend Kings that have consistently paid dividends for 50 years or more. This could provide you with an income stream that doesn't require you to sell your investments.
2. Declining health
Aging usually brings more health challenges -- and large medical bills. You'll need adequate health insurance to help you absorb these. This will likely include Medicare, but Original Medicare has several gaps. You'll likely need additional policies to cover things like prescription drugs, dental, hearing, and vision care, and long-term care, if you expect to need it.
A health savings account (HSA) can also be beneficial in retirement. These accounts allow tax-free medical withdrawals at any age, though you cannot contribute to an HSA after you've enrolled in Medicare.
You can set aside up to $4,400 in an HSA in 2026 if you have an individual health insurance plan with a deductible of $1,700 or more. Those with family plans with deductibles of $3,400 or more can save up to $8,750 in an HSA next year. Adults 55 and older can add another $1,000 to these limits.
3. Market volatility
Market volatility can be especially concerning once you're in or near retirement, because you don't have decades to recover from losses like younger workers. There's no way to control the stock market, but there are things you can do to reduce your risk of catastrophic loss.
First, make sure you maintain a diversified portfolio. Don't put too much of your savings in any one investment. Spread your money around between stocks of different sectors and bonds. One common rule of thumb suggests that you should keep 110 minus your age in stocks, with the remainder in bonds. This ensures that your portfolio becomes more conservative as it grows, helping you protect what you have.
You can also use a bucket strategy. This is where you sort money into three buckets -- short-term, medium-term, and long-term -- depending on when you plan to use them. You keep short-term funds in cash, certificates of deposit (CDs), or other low-risk investments. Medium-term investments can be allocated to assets such as bonds, while long-term assets are typically invested in stocks.
This approach gives you a bit more flexibility in the timing of your withdrawals, so you don't have to sell a significant portion of your assets when you're down. You can pay for living expenses out of your short-term funds, and then periodically transfer some money from the medium-term to the short-term bucket and some from the long-term to the medium-term.
It's likely you'll encounter at least one of the three challenges above during your retirement, so take some time to develop strategies for addressing these things if you haven't already. Brainstorm additional challenges you think you might face as well, and see if you can figure out ways to tackle them so you know how to respond if they come up in retirement.
