#3 Financial Risks—Stock Market Risk
Stock market losses can drastically minimize your retirement savings. Over time, common stocks have outperformed other investments and therefore they are usually recommended for retirees as part of a balanced asset allocation strategy.
However, the rate of return a retiree can earn from his or her stock portfolio can be significantly lower than the long-term trends. Stock market losses can substantially minimize one’s retirement savings if the market value of his or her portfolio falls.
The downfalls and the rises of stock market can affect the amount of your retirement savings. For example, a retired person who deals with poor market returns in the first years of retirement will most likely have a different outcome than another one who deals with good market returns in the first years of retirement.
Early losses can translate to less income during retirement while later losses can have a not-so-big impact, as a retiree may have a much shorter period over which his or her assets need to last.