As we ring in a new year, retirees should be ready to deal with new risks and uncertainties as Donald Trump makes his return to the Oval Office. Undoubtedly, only time will tell if President-elect Trump will follow through with proposed tariffs. If he does, investors of all ages had better be prepared for any and all potential scenarios. Whether we’re talking about the dreaded return of inflation or an increase in stock market volatility, retirees must be ready to navigate through an environment that could see a rockier road and far milder returns.

Of course, I could be wrong, and the S&P 500 could be in for another smooth, correction-free year of returns north of 20%. Timing the market is almost always a very bad idea, especially if you’re looking to cash out entirely before a market peak. The odds are that you won’t be able to sell out of stocks right before the top, causing you to run the risk of missing out on further gains. While timing markets are unadvisable (just ask your financial advisor), I do think there are risks that ought to be on your radar as we move into a new year with stocks near all-time highs.

Risk #1: The inflation genie finds its way out of the bottle

Inflation is working against all of us. Arguably, not readying for more inflation could be one of the greater risks for 2025. And while America has seemingly slain the beast or put the genie back in the bottle, depending on which idiom you prefer, I’d argue that investors, especially retired ones, shouldn’t let their guards down with the expectation that inflation will be around 2% for 2025 and beyond, especially if Donald Trump follows through on promises to impose tariffs on Canada, Mexico, China, and other nations. Indeed, firing the first shots of a trade war could really damage the purchasing power of the red-hot greenback. In any case, I do think retirees should meet up with their advisors to prepare a plan that takes into account an inflation resurgence.

Whether that entails being a tad more conservative with the withdrawal rate or allocating a greater chunk of one’s investment dollars towards “inflation fighter” types of assets (think gold or companies like American Express (NYSE:AXP), which could experience greater transactions as a result of higher prices), retirees must be ready to fight back against inflation should it rear its ugly head in the new year.

Risk #2: A more turbulent ride for the stock market

Donald Trump’s expected policy changes are expected to be a good thing for stocks on the whole. That said, just how much of the “Trump bump” is priced in? Probably a big chunk following the latest Santa Claus rally. Either way, optimism, and market momentum may end up setting the stage for a rougher patch in 2025.

Of course, there’s no guarantee that 2024’s gains will result in a correction in the new year. Either way, don’t forget that corrections happen, and they’re nothing to be afraid of. While they may feel tougher to get through after a correction-free year of above-average gains for markets, it’s important to have the right allocation in place to ride out any storms that may hit shortly after peak optimism.

So, how should investors prepare to combat volatility? Talk to your advisor. They may recommend increased exposure to bonds, REITs, or other lower-beta assets. Personally, I’d point you in the direction of the Invesco S&P 500 Low Volatility ETF (NYSE:SPLV), an underrated ETF with a below-average 0.64 beta.

Risk #3: A rise in healthcare costs

Finally, an uptick in healthcare costs could have the potential to weigh down your retirement lifestyle. Notably, heftier premiums on certain plans could cause some to revisit the monthly budget.

Indeed, I’d strongly encourage retirees to factor in all health-related expenses, given healthcare can be one of the most significant derailers of a comfortable retirement. Should things become considerably more expensive in the new year, it’s vital to have a game plan so that nothing can put crack your retirement nest egg.

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