6 Risks a New Vanguard Report Warns Can Drain Your Retirement Savings—and How to Beat Them

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Saving is only part of the equation when preparing for retirement—not planning for common risks can increase your odds of running out of money.

Only 57% of workers think their savings will last their lifetime, according to the 2026 EBRI Retirement Confidence Survey.1 But outliving your savings is far from inevitable.

A new Vanguard report lays out six risks investors face when preparing for retirement.2 By taking action well before you stop working, you can blunt each and retire with more confidence.

When you're living off a fixed income, a market downturn can drop your standard of living and shrink your future savings. In a down market, you may need to withdraw more from your portfolio to maintain your lifestyle. But if you do this early in retirement, your nest egg may not grow as much in the long run. This is known as sequence-of-returns risk.3

To reduce this risk, consider how you're splitting up your investments among stocks, bonds, and so on. While a more aggressive portfolio can be worthwhile when you're younger (James Choi, a Yale finance professor, suggests keeping your portfolio almost entirely in stocks while you're working), you'll want to shift toward more conservative assets as you age—they're less likely to drop your account balances just when you need them.

While Social Security benefits are indexed to inflation, a rising cost of living can quietly erode your purchasing power, and, like sequence-of-returns risk, the damage is made worse when it hits early in retirement. If you can, trim spending during high-inflation years soon after you retire.4

Whether your roof collapses or a loved one dies unexpectedly, having some extra money stashed away for emergencies can help prevent you from running through savings too quickly or relying on credit cards and other forms of debt. Vanguard researchers suggest anticipating unexpected expenses and establishing a contingency fund to cover them.5

One of the most important elements of retirement planning is ensuring you have enough funds to last, even as Americans live longer. Vanguard's report suggests that a long retirement poses a bigger risk of running out of money than bad market conditions do.

"Our research shows that a diversified portfolio of $1 million starting at age 66, with a 6% withdrawal rate and 2% inflation, can last 20 years with median and poor market performance. If retirement lasts 30 years, however, savings may run out in either market scenario," the report noted.

To mitigate longevity risk, consider delaying Social Security. For each year you delay receiving benefits after full retirement age (FRA), up to age 70, your annual benefits increase 8%.6 Other options include guaranteed income sources like annuities.

Between Medicare premiums, prescription drugs, and out-of-pocket costs, medical expenses can add up quickly.

Weigh your health insurance options carefully before retirement, deciding whether you'd prefer a Medicare Advantage plan or original Medicare (and a Medigap plan if you choose). A health savings account (HSA) can also help: contributions are tax-deductible, the money grows tax-free, and withdrawals for qualified medical expenses are tax-free.

The Vanguard researchers also suggest people prepare for the possibility of cognitive decline, which can influence financial decision-making, by establishing a power of attorney. With a power of attorney, you select someone to act on your behalf if you fall ill.7

You can also add a trusted contact to your financial accounts.

"Think of it like adding an emergency contact who can be reached if there are concerns about unusual account activity or your well-being," the report said.8

For many, retiring can be a challenging adjustment, so it's important to stay anchored to your financial plan, whether that means not selling during a down market or not collecting Social Security too early.

Working with a certified financial planner can help. They can guide you through any big changes or help you avoid emotional reactions.

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