Month: October 2025

Mountaineers who fail to identify and effectively mitigate specific risks often become valuable examples for more studious climbers. Just as hypothermia, personal injuries, white-outs, slip-and-falls, avalanches, and crevasse falls threaten the mountaineering expedition, the following hazards endanger an equally challenging endeavor, the Retirement Income Plan. Identify and mitigate the following risks to help improve the sustainability of your retirement income and lifestyle:

1. Market Risk

Market fluctuations can significantly impact retirement portfolios, especially for those relying on investments to generate income. A major downturn can erode account balances just as retirees begin withdrawing funds. Diversification across asset classes and maintaining an appropriate mix of growth and defensive investments may help mitigate this risk.

2. Interest Rate Risk

Interest rate movements affect both bond values and the income retirees can earn from fixed-income investments. Rising rates can reduce the market value of existing bonds, while prolonged low rates can make it difficult to generate sufficient income safely. A laddered bond strategy or a mix of short- and intermediate-term instruments can provide balance and flexibility.

3. Sequence of Returns Risk

The order in which investment returns occur matters greatly in retirement. Experiencing negative returns early—while taking withdrawals—can permanently damage a portfolio’s longevity. Managing withdrawals strategically, holding a cash reserve, and using income “buckets” or guaranteed income sources can help offset this timing risk.

4. Inflation Risk

Even modest inflation erodes purchasing power over time. A dollar today won’t buy as much 20 years from now. Including assets that tend to outpace inflation—such as equities, real estate, or inflation-protected securities—coupled with a delay in Social Security benefits can help maintain the real value of income over time.

5. Long-Term Care Risk

The potential cost of extended care late in life poses one of the most significant threats to retirement security. Whether provided in-home or in a facility, long-term care expenses can quickly deplete savings. Options like long-term care insurance, hybrid life/LTC policies, or setting aside dedicated assets can provide protection.

6. Income Tax Risk

Future tax policy is uncertain. Rising federal or state taxes could reduce net retirement income, particularly from taxable accounts or required distributions. Proactive tax diversification—using a mix of taxable, tax-deferred, and tax-free accounts—offers flexibility to manage withdrawals efficiently under changing tax regimes.

The Bottom Line

A successful retirement plan isn’t just about growth—it’s about managing financial risks, much the way an accomplished climber manages mountain perils. By addressing these key threats with thoughtful diversification, flexible withdrawal strategies, and prudent contingency planning, retirees may increase their confidence that their income will endure as long as they do. Think about it and may God bless your planning efforts, Shaun.

“The prudent sees danger and hides himself, but the simple go on and suffer for it”. ~Proverbs 22:3

“Where there’s no guidance a person falls, but in an abundance of counselors there is safety”. ~Proverbs 11:14

Disclosure(s)

The information provided herein is for education purposes only and should not be construed as personalized investment, tax, or legal advice.  Investing involves risk, including the potential loss of principal.  Past performance is not indicative of future results.  Any strategies discussed may not be suitable for all investors and should be considered in the context of an individual’s financial circumstances and objectives.

Old Forge Wealth Management, LLC (“OFWM”) is a registered investment adviser located in Rhode Island.  Registration does not imply a certain level of skill or training.

Examples and opinions expressed are full illustrative purposes only and do not constitute a recommendation or solicitation to buy or sell any security.  All information is believe to be accurate at the time of publication but may change without notice.

Building wealth is less about luck and more about disciplined principles applied consistently over time. Below are ten foundational principles, each with practical examples to help guide your financial journey.

1. Increase Earning Power

Invest in yourself through ongoing education and specialization in your field.
Example: An engineer who earns additional certifications may qualify for higher-paying roles, increasing long-term income.

2. Carry Some Cash

Maintain an emergency fund of 6–12 months of household expenses. Keep cash in your portfolio to hedge downturns, seize opportunities, and stay disciplined.
Example: During a market dip, an investor with available cash can buy quality stocks at discounted prices.

3. Keep Debt Low

Strive for a low debt-to-equity ratio and aim to retire debt-free.
Example: A family that pays off their mortgage early frees up thousands in monthly cash flow for savings and investments.

4. Avoid Consumer Debt

Say no to impulse spending and ensure your household maintains a positive cash flow.
Example: Avoid financing a new car unnecessarily—opt for a reliable used vehicle and save the difference.

5. Invest 15–20% of Earnings

Regularly invest a portion of income using Dollar Cost Averaging in both equity and debt of capital-efficient businesses.
Example: Contributing monthly to an index fund smooths market volatility and builds long-term wealth.

6. Reinvest Dividends

Compound returns by reinvesting dividends from industry leaders over decades.
Example: A $10,000 investment in dividend-paying companies can multiply many times over if dividends are reinvested rather than withdrawn.

7. Protect Against Catastrophic Loss

Do thorough due diligence, diversify holdings, and maintain exit strategies for risky assets.
Example: A balanced portfolio of stocks, bonds, and real estate reduces the chance of a single market event wiping out wealth.

8. Manage Taxes Smartly

Plan to minimize lifetime taxes—pay more when in low brackets, and less when in high ones.
Example: Contributing to a Roth IRA while in a lower tax bracket can provide tax-free income in retirement.

9. Own the Right Insurance

Ensure you have the right type and amount of life insurance at the right price—avoid being “insurance-poor.”
Example: A young parent with term life insurance ensures family protection without overpaying for costly permanent policies.

10. Stay Disciplined Over Time

Wealth is built over years, not months. Commit to consistency, patience, and adaptability as circumstances change.
Example: A disciplined saver who invests steadily for 30 years often achieves financial independence regardless of market cycles.

These principles are not shortcuts—they are timeless guidelines. Applied consistently, they help individuals and families create resilience, seize opportunities, and ultimately achieve financial independence. Hold it loosely and God bless your efforts, Shaun.

“Give a portion to seven, or even eight, for you know not what disaster may happen on earth.”  ~Ecclesiastes 11:2

Disclosures:

The information provided in this blog is for educational purposes only and should not be construed as investment, legal, or tax advice. Investing involves risk, including the potential loss of principal, and past performance is not indicative of future results. Examples provided are hypothetical and for illustrative purposes only; they do not represent actual results and should not be relied upon for making financial decisions.

Old Forge Wealth Management, LLC is a registered investment adviser located in Rhode Island. Registration does not imply any level of skill or training. For advice specific to your personal circumstances, please consult a qualified financial professional.