Month: January 2026

The savvy vegetable gardener must mitigate insect risk and rodent risk, drought risk and weed risk, nutrient depletion risk and dead seed risk; the effective mitigation of all but one deadly peril can result in a fruitless garden! Likewise, planning a financially resilient retirement requires identifying and mitigating the following seven hazards, each of which can upend a retiree’s financial life.

• Market Risk involves the possibility of a dramatic decline in asset prices which can leave insufficient capital to fund retirement income needs. Potential mitigation strategies include portfolio diversification consistent with one’s risk profile, proper position sizing, and maintaining an exit plan on risky holdings from the time of purchase. Converting a portion of invested assets into a permanent income stream may help reduce market risk.

• Interest Rate Risk concerns the negative impact that a significant change in market rates can have on a retiree’s income and/or assets. Declining interest rates equate to less annual income on newly purchased fixed income holdings, like CD’s, fixed annuities, and government bonds. Rising interest rates cause outstanding bond values to fall and can result in investment losses.

• Sequence of Returns Risk applies to the disproportionately damaging effect that a bear market proximate to one’s retirement date has on portfolio values. Mitigation strategies include a reduction in portfolio risk during the ‘retirement date’ period, reducing account withdrawals until the market recovers, and a partial conversion of stocks into a lifetime income stream.

• Inflation Risk, perhaps the most difficult of the major hazards to perceive, nibbles away at the purchasing power of each currency unit the way a potato bug does the plant’s nutrient-enriching leaves. Delaying Social Security benefits and allocating a meaningful portion of invested capital in assets which have outperformed inflation over time, like high quality stocks, real estate, and other real assets, can be useful inflation-fighting strategies.

• Risk of Increasing Income Tax Rates is a terrifying proposition to the retiree with 100% of their capital sitting in a Traditional retirement account, yet with both Social Security and Medicare running large deficits, and while presently residing in a relatively low-tax era, the threat is real. Thoughtful asset ‘location’ between taxable, non-taxable (Roth, HSA), and tax-deferred (Traditional) investment accounts, and engaging an ongoing and effective tax management plan can help reduce exposure to this risk.

• Long-Term Care (LTC) Risk, or the potential for a calamitous increase in retirement expenses due to the high cost of care late in life, can impoverish a retired spouse and vaporize legacy assets! Effective mitigation strategies include familial caregiving, advanced trust planning, Long-Term Care insurance, and Medicaid planning.

• Longevity Risk involves the possibility a retiree will live longer than expected and, therefore, need to fund additional years of spending. Delaying Social Security benefits, purchasing a deferred income annuity or a Qualified Longevity Annuity Contract (QLAC), and monitoring the Retirement Income Plan can help contain this risk.

On a scale of 1-10, what is your personal exposure to each of these threatening perils? Which of the potential mitigation strategies are most agreeable with your planning and investment temperament, and most consistent with your financial plan? May your efforts be blessed, and your plan prove fruitful. Shaun

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

Disclosure:

This commentary is provided for informational and educational purposes only and is not intended as personalized investment, tax, legal, or financial advice. Old Forge Wealth Management, LLC is a registered investment adviser. Any opinions expressed are as of the date of publication and are subject to change. Investing involves risk, including the possible loss of principal. Diversification and asset allocation do not ensure a profit or protect against loss in declining markets.

This material may reference general planning strategies, including retirement income planning, Social Security claiming strategies, tax management concepts, insurance planning, annuities, long-term care planning, and Medicaid planning. These strategies may not be appropriate for all individuals and should be evaluated in light of your objectives, risk tolerance, time horizon, financial situation, and overall plan.

References to tax rates, Social Security, Medicare, or other government programs are based on current understanding and may change due to future legislation, regulation, or administrative guidance. For advice specific to your situation, please consult with your tax professional and/or attorney.

Annuities, including deferred income annuities and Qualified Longevity Annuity Contracts (QLACs), are insurance products and are subject to the claims-paying ability of the issuing insurer. Guarantees are based on the financial strength of the insurer. Riders, fees, expenses, surrender charges, liquidity restrictions, and tax consequences may apply.

Long-term care planning and Medicaid eligibility are complex and vary by state and individual circumstances; professional guidance from a qualified elder law attorney is recommended.

The weather report for the Continental Divide west of Denver that day in February 2014 called for sun, +5-degree temps, and gusts to 20mph, perfect conditions for a daylong winter excursion! Unfortunately, we believed the report. After battling mild altitude sickness, -5-degree temps, and constant 60mph winds for seven hours, my overconfidence was exposed and I nearly succumbed to the elements for lack of remembering the indispensable principle, “mountains make their own weather”. No less do the financial markets create their own volatility, and following the 36 months we just experienced, certain principles are important to remember at a time such as this. Let’s identify those principles as we consider the outlook for the financial markets in 2026.

THE OUTLOOK

Major U.S. banks are universally bullish on the S&P 500 for 2026, though expected returns range from a paltry 4% (Bank of America) to a rosy 18% (Oppenheimer). Supporting this outlook are the facts a) the S&P 500 advance/decline line has been rising with continuity that rivals the morning sun, indicating a broad and healthy advancement,¹ b) the CNN Fear & Greed Index stands at 50, or “neutral”, suggesting the psychological euphoria generally cohabitating major market tops is absent, and c) large government and private sector investment in energy sources demanded by AI supercomputers is “LIVE”.² Balancing positive expectations for 2026 is the Presidential Election Cycle Theory, which measures average S&P 500 returns for each distinct year of Presidential cycles since 1950. The study reveals there have been two years of good average returns (years 1 and 4), one year with great average returns (year 3), and one year with bad average returns coupled with increased volatility (year 2).³ Also on the negative side are the facts a) employment is weakening, b) the subprime consumer is tapped, and c) the credit market has shown signs of tightening, but increased economic efficiency from parabolic technological advancement seems to be neutralizing their impact and bolstering corporate earnings, at least for now.

TWO FACTORS TO CONSIDER

• Positive: The market doesn’t seem irrational quite yet, but even if the studies are wrong and it is, the market can remain irrational longer than you can remain solvent. Fight inflation, not the trend!
• Negative: There are exceptions, but investment risk generally rises in tandem with rising valuations (P/E Ratio). Today’s S&P 500 valuation rivals historical peaks, and new investments into large US stocks better understand this research.

CONCLUSION

A highly disruptive global megatrend is in full swing with the widespread adoption of AI and other technological advancements. This trend may render market research less reliable as economic learning and automation accelerate. Dangers lurk but the bull market appears intact. Returns in 2026 may be modest or even negative, and heightened volatility is highly probable as the market prepares for year 3 (2027), the year of great average Presidential Cycle returns.

PRINCIPLES TO REMEMBER IN LATE STAGES OF A BULL MARKET

• Lean, don’t jump. Maintain a diversified portfolio with appropriate asset allocation consistently over time. Never allow emotions, economic forecasts, or geopolitical developments affect investment decisions; rather, use high quality tools to push decisions based on an investment plan. Tweak your allocation, don’t shuffle it.
• Manage risk with an exit plan, especially on speculative and highly appreciated securities. Invest large, but speculate small, and only with well-researched, high conviction ideas.

Don’t forget, mountains make their own weather! May God bless your desires to be a good steward and a wise investor, Shaun.

“Precious treasure and oil are in a wise man’s dwelling, but a foolish man devours it.” ~Proverbs 21:20

1 Market In Out Stock Screener, S&P 500 Advance/Decline Line, January 15, 2026

https://www.marketinout.com/chart/market.php?breadth=advance-decline-line

2 Doc Eifrig’s Health & Wealth Review, “The Banks Are Predicting a Good Year for Stocks”, January 11, 2026

3 Wealth Management, “Presidential Election Cycle Theory”, August 2024 White Paper by John Heilner, CIO

https://www.wtwealthmanagement.com/whitepapers/2024-08/

Disclosure: Old Forge Wealth Management, LLC is a registered investment adviser. This material is for informational and educational purposes only and should not be construed as investment advice or a recommendation to buy or sell any security. This commentary is general in nature and not tailored to the circumstances of any specific investor. The principles discussed are general investment considerations and may not be appropriate for every investor. Individual circumstances, risk tolerance, and objectives should be considered. Market commentary and outlooks are based on current conditions and third-party sources believed to be reliable; however, accuracy is not guaranteed. Forecasts, projections, and return expectations are inherently uncertain and are not guarantees of future performance. Past performance is not indicative of future results. Investing involves risk, including possible loss of principal. Indexes referenced are unmanaged, do not reflect fees or expenses, and are not available for direct investment.

Early in my mountaineering career I discovered that a handful of ginger on the pre-summit push rest stop provides a sustainable burst of energy with no residual crash. I’ve never climbed without a bag of ginger since that wonderful revelation occurred! An experienced climber uses every technical, nutritional and directional advantage available to survive mountain hazards and reach the finish line, which is a warm car. Dodging retirement pitfalls like market and interest rate risk, sequence of returns and longevity risk, inflation and tax-hike risk, and long-term care risk, is no easier, though effective risk mitigation strategies avail. Consider the redeeming qualities (and understand the shortfalls) of a qualified longevity annuity contract (QLAC) as you strategically plan the later income years of your own retirement.

• A QLAC is a special type of deferred annuity you can buy with money from a tax-deferred retirement account (like a traditional IRA or 401(k)). Its main purpose is to provide a fixed source of income later in life, typically starting as late as age 85.
• Money used to buy a QLAC may be excluded from RMD calculations until payouts begin (up to age 85). This can lower taxable income in one’s 70s and early 80s. Maximum contribution is $200,000 or 25% of eligible retirement funds (whichever is less).
• Helps protect against longevity risk (exceeding life expectancy and having to fund the extra years) by providing a guaranteed lifetime income source.
• Tax deferral of QLAC dollars (until income begins) tends to lower taxable income, which can expand strategic Roth Conversion opportunities and other savvy tax maneuvers.
• QLAC’s offer market risk mitigation, since future payments are guaranteed.
• QLAC income complements Social Security to layer income sources and match them with future expenses. Research suggests retirees are happier spending a permanent source of income (like a pension) as opposed to selling assets to create income (like a systematic withdrawal program). They are more confident and content, and they spend more than those using a systematic withdrawal (who actually underspend as a group).¹
• QLAC income is generally received in one’s later years, when inflation is felt most and expenses escalate amidst health declines. That ginger sure comes in handy at high camp!  It can be harder for elder abuse to occur when income streams are passive.

There’s no downside to ginger that I know of, but few things on this earth consist of all positives. QLAC’s reduce liquidity, offer no inflation-fighting upside on invested capital (in an inflationary culture), and actually increase inflation risk (since income payments don’t generally rise). Also, if the retiree passes before income payments begin a loss of capital can occur (unless a return of premium option is purchased).

A QLAC may be well suited for retirees worried about outliving their savings, for those with very large Traditional Retirement account balances, and for those who seek retirement income certainty.

God bless your retirement income planning efforts!

Shaun.

“In an abundance of counselors there is safety” ~Proverbs 11:14

1 The College of America, Retirement Income Certified Professional RICP®, December, 2025

Disclosure: Old Forge Wealth Management, LLC is a registered investment adviser. This material is for educational purposes only and is not individualized investment, tax, or legal advice. Any guarantees referenced are subject to the claims-paying ability of the issuing insurance company. Tax rules are complex and subject to change, and the tax treatment of a QLAC (including any impact on RMD calculations) depends on individual circumstances. There is no guarantee that any strategy will be successful. Consult your financial, tax, and legal professionals before implementing any strategy.