Why I Frame Retirement Risk Differently in San Diego
When people think about retirement risk, they often focus on market volatility. That’s understandable since it’s loud, emotional, and constantly in the news. But after working with San Diego families for decades, I’ve learned something important:
The biggest retirement risks are often the quiet ones.
They don’t make headlines. They don’t show up on quarterly statements. But they have the power to shape how confident—or anxious—retirement actually feels.
Risk Isn’t Just About the Market
Market swings are visible. You can see them. You can feel them. But many of the most impactful retirement risks operate in the background.
They show up slowly, over time, and often only become obvious after damage has already been done. That’s why I focus less on predicting markets and more on understanding structural risks, especially for those pursuing retirement planning in San Diego.
Retirement in San Diego Comes With Unique Realities
San Diego is a wonderful place to retire. It’s also a challenging one. Long life expectancy, high cost of living, significant real estate exposure, and California’s tax environment all influence how retirement unfolds here.
National averages don’t tell the full story. Local context matters.
Risk #1 — Longevity: The Risk of Living a Long Life
Longevity is one of the greatest gifts of living in San Diego. It’s also one of the most underestimated risks.
People are living longer, healthier lives, and that means retirement often lasts 25, 30, or even 35+ years. The challenge isn’t reaching retirement. It’s sustaining confidence throughout it.
Longevity is a good problem, but it requires awareness.
How Longevity Quietly Changes Everything
When retirement stretches across decades, small assumptions matter. Income sustainability matters. Flexibility matters. The margin for error narrows over time.
I often remind families that time doesn’t forgive poor structure—it magnifies it. Longevity makes planning less about hitting a number and more about supporting a lifetime.
Risk #2 — Tax Drag: The Risk You Don’t See
Tax drag is one of the least understood and most impactful retirement risks.
In simple terms, tax drag refers to how taxes slowly reduce the income you actually get to keep. It’s not dramatic. It’s incremental. And over time, it adds up.
For San Diego retirees, tax drag often matters more than people expect.
Why Tax Drag Matters More in Retirement
Taxes don’t retire when you do. In fact, for many retirees, taxes become more complex. Income can come from multiple sources, each treated differently.
In California, where tax rates are higher, the impact of tax drag is amplified. What looks sufficient before taxes may feel very different after them.
This is one reason working with a retirement planner in San Diego who understands the local environment changes the conversation.
Risk #3 — Sequence of Returns: Timing Matters
The phrase sequence of returns sounds technical, but the concept is simple.
It refers to when market returns happen—not just what the average return is.
If market downturns occur early in retirement, while income is being drawn, the long-term impact can be significantly greater than if those same downturns happen later.
An Easy Way to Understand “Sequence of Returns Risk”
Picture two retirees who retire the same year with the same amount saved. They invest in the same kind of portfolio. Over 30 years, they even earn the same average return.
On paper, you’d think they’d end up in the same place… but they don’t.
Here’s why:
Retiree A: The losses hit early
In the first few years of retirement, the market drops. Retiree A is still taking withdrawals to cover real-life expenses—mortgage, groceries, travel, grandkids, you name it.
So they’re not just riding out the downturn… they’re selling shares while prices are down to fund income.
That does two things:
- It locks in losses (because you sold when things were discounted).
- It leaves fewer shares invested for the recovery.
Even if the market rebounds later, Retiree A is trying to rebuild with a smaller base.
Retiree B: The losses hit later
Retiree B gets the opposite sequence: early retirement years are positive or steady. Their portfolio has time to grow before they ever hit a major downturn. When a market decline eventually shows up later, they may have:
- A larger account balance to absorb the hit
- Smaller withdrawals relative to their portfolio
- More flexibility to adjust
Same average return. Totally different results.
The big takeaway is that timing matters more than most people realize, especially in the first 5–10 years of retirement.
When you’re adding money (during your working years), market drops can be uncomfortable, but time is on your side. When you’re taking money out, early losses can create a “hole” that’s surprisingly hard to climb out of.
That’s the heart of the sequence of returns risk:
It’s not just what you earn. It’s when you earn it—relative to when you start taking income.
How These Three Risks Interact
Longevity, tax drag, and sequence of returns don’t operate independently. They interact.
Longer lives mean more years exposed to tax drag. Early market losses have more time to ripple. Taxes reduce flexibility just when flexibility matters most.
These risks compound quietly, but powerfully.
Why Traditional Advice Misses These Risks
Much traditional advice focuses on accumulation and performance. That works well during working years. Retirement changes the equation.
When advice doesn’t shift with life stage, risks go unaddressed—not because they’re invisible, but because they’re misunderstood.
What I See Go Wrong for San Diego Retirees
I often meet families who have done everything “right.” They saved diligently. They invested consistently. Their portfolios look strong.
Yet they feel uncertain.
That uncertainty usually isn’t about markets; it’s about structure. About not fully understanding how longevity, taxes, and timing intersect in their life.
Why Local Retirement Planning Changes the Conversation
San Diego retirees live differently from retirees elsewhere. Coastal living, healthcare access, proximity to family, and lifestyle expectations all influence spending and priorities.
Local retirement planning in San Diego reflects these realities. It moves beyond theory and into lived experience.
The Role of a Fiduciary Perspective
A fiduciary perspective emphasizes clarity and alignment. It asks different questions. It focuses on design before decisions.
That approach is especially valuable when addressing risks that don’t announce themselves loudly, but shape outcomes profoundly.
FAQs
1. What is the biggest retirement risk for San Diego retirees?
Longevity is often the most underestimated risk, given the region’s longer life expectancy.
2. What does tax drag mean in retirement?
Tax drag refers to the effect of ongoing taxes on the income retirees actually keep over time.
3. What is the sequence of returns risk?
It’s the risk that poor market returns early in retirement have a greater long-term impact than later losses.
4. Why does location matter in retirement planning?
Cost of living, taxes, and lifestyle vary significantly by region and affect retirement outcomes.
5. When should retirees start thinking about these risks?
Ideally, before retirement begins, but awareness can improve confidence at any stage.
A Quote That Captures My Philosophy
“The most important retirement risks aren’t the ones that scare you today—they’re the ones that quietly shape your confidence tomorrow.”
— Elisabeth Dawson
Final Thoughts for San Diego Retirees
Retirement risk isn’t about avoiding uncertainty—it’s about understanding it. Longevity, tax drag, and sequence of returns matter because they affect how retirement feels, not just how it looks on paper.
When families focus on what truly matters, retirement becomes less reactive and more intentional.
Let’s Continue the Conversation
If you’re considering retirement and want clarity on the risks that truly matter, I invite you to schedule a complimentary consultation.
Call (619) 640-2622
Schedule your free consultation
For San Diego retirees, the most important risks aren’t always obvious. Longevity, tax drag, and sequence of returns quietly shape retirement confidence. Understanding them brings clarity and peace of mind.