War, AI, and Inflation Are Reshaping Retirement Risk. If You Are 60 or Older, This Is the Most Important Article You Will Read This Year.

The Federal Reserve printed more than $3.3 trillion in 2020 alone, roughly one-fifth of all U.S. dollars in existence at the time. The Fed balance sheet doubled from $4.2 trillion to $8.8 trillion between late 2019 and late 2021. Since January 2020, cumulative inflation has eroded approximately 25% of purchasing power — more than double the 10% seen across the entire prior five-year period.

At the same time: a war in Ukraine with both sides escalating attacks on energy infrastructure. Escalating conflict in the Middle East. AI displacing white-collar workers at a pace that is only accelerating. And a stock market that dropped 12% in a single month in April 2025 before recovering — with the S&P 500 still down 4% year-to-date entering April 2026.

If you are 60 or older, you did not sign up for this environment when you built your retirement plan in your 40s. The macroeconomic ground beneath retirement savings has shifted in ways that most financial plans have not accounted for.

The question is not whether the risk is real. It is whether your strategy has adapted.

To understand what is happening to retirement accounts right now, you need to understand what happened to the money supply starting in 2020.

When the pandemic hit, the Federal Reserve responded with an unprecedented level of monetary expansion. The numbers from Brookings and the Congressional Budget Office are stark:

• ◆Fed balance sheet grew from $4.2 trillion (Q4 2019) to $8.8 trillion (Q4 2021)
• ◆Bank reserves rose from $1.6 trillion to $4.0 trillion in two years
• ◆Currency in circulation increased from $1.8 trillion to $2.2 trillion
• ◆Approximately $3.3 trillion was created in 2020 alone

This level of monetary expansion does not disappear. It works through the economy as inflation, which is precisely what happened. The cumulative price increase since January 2020 is approximately 25%. The March 2026 CPI reading came in at 3.3% year-over-year, above January's 2.4%, and analysts expect inflation to continue running above 3% through early 2026.

What this means for a retiree on a fixed income is straightforward and brutal: a $60,000 per year retirement income in 2020 requires $75,000 per year today to buy the same goods and services. That $15,000 gap does not narrow on its own. It compounds forward unless your savings are growing at a rate that outpaces inflation and taxes.

A savings account at 4% interest in a 22% tax bracket nets approximately 3.1% — barely matching current inflation, with no growth in real terms. A market-exposed portfolio participates in growth but also absorbs the full force of every market correction. A Fixed Indexed Annuity addresses both problems by offering indexed growth with a protected floor.

Financial planning has always had to account for geopolitical uncertainty. What is different about 2025 and 2026 is the number of simultaneous elevated risks, each with direct economic consequences.

Ukraine: Armed conflict continues with both sides escalating attacks on energy infrastructure. Energy price volatility has direct downstream effects on global inflation. According to the Eurasia Group's Top Risks of 2026 report, a durable ceasefire remains a low probability outcome in the near term.

Middle East: The Gaza ceasefire remains fragile, and analysts including EY's Global Geopolitical Outlook and BlackRock's Geopolitical Risk Dashboard assign elevated probability to an Israel-Iran military confrontation. An oil price spike of the kind that would follow broader Middle East escalation directly accelerates the inflation problem described above.

U.S. tariffs: The United States is maintaining historically high tariff levels as of 2026, disrupting global trade flows and adding to input costs across manufacturing, retail, and agriculture. These costs pass through to consumer prices.

The New Lines Institute's 2026 Annual Forecast notes that global trade flows are stabilizing relative to the shock of 2025, but that risk remains elevated across all three theaters simultaneously.

Each of these events in isolation would be manageable. Together, they create compounding economic instability at precisely the moment when 10,000 Baby Boomers are retiring every day. The people most exposed to this environment are those who are already retired or within 5 years of retirement and have market-exposed portfolios.

The AI disruption is often discussed in abstract terms — productivity gains, efficiency improvements, long-term economic growth. The near-term reality for workers and retirees is more complicated.

According to research from the Dallas Federal Reserve, McKinsey Global Institute, and Goldman Sachs:

• ◆AI could deliver $13 trillion in additional global economic activity by 2030 (McKinsey)
• ◆In the first half of 2025, 50% of total U.S. GDP growth was attributed to AI infrastructure investment
• ◆Customer service employment declined by 80,000 positions between 2022 and 2024
• ◆55,000 job cuts were directly attributed to AI in 2025
• ◆Workers in AI-exposed occupations ages 20 to 30 saw unemployment rise 3 percentage points since the start of 2025
• ◆40% of employees in 2026 report concerns about AI-related job loss, up from 28% in 2024

For people who are 60 or older and still working, AI is actively disrupting the industries that provide bridge employment and part-time income. For retirees who depend on portfolio growth to fund 20 or 30 more years of income, AI-driven economic disruption introduces a new variable: the possibility that a shallow AI-related recession, flagged by Eurasia Group and OANDA as a 2026 risk scenario, could trigger a market correction at exactly the wrong time.

The pattern is well-established. Economic disruption events create market volatility. Market volatility at retirement creates sequence of returns risk. And sequence of returns risk, for people who are already drawing income from their portfolios, is the most dangerous financial event of a lifetime.

We have written about sequence of returns risk in depth. The short version: it is not the average return of your portfolio that determines whether you run out of money. It is the timing of the losses.

For people age 60 and older, this risk is more acute than at any other stage of life, for three reasons:

Larger balances. A 60-year-old typically has a larger account balance than at any previous point in life. A 20% market loss on $800,000 is $160,000. The same percentage loss on a $50,000 account at age 30 is $10,000. The absolute dollar damage is incomparably greater.

Fewer recovery years. A 35-year-old who loses 30% in a bear market has 30 years to recover. A 65-year-old has perhaps 5 to 10 years before that money needs to produce income consistently.

Active withdrawals. A retiree drawing $60,000 per year from a portfolio that just dropped 25% is selling shares at a discount to fund living expenses. Those shares never recover, because they have been sold. This is the mechanism that destroys retirement portfolios even in markets that eventually go back up.

The numbers are sobering. According to AARP's 2024 survey:

• ◆20% of adults age 50 and older have NO retirement savings at all
• ◆80% of older adult households (47 million Americans) are financially struggling or at risk, according to the National Council on Aging
• ◆24% of adults age 50 and older expect to never retire, up from 23% in 2022

And those are the people before accounting for what inflation, geopolitical risk, and AI disruption are doing to the markets they are depending on.

Wade Pfau, PhD, CFA, one of the foremost retirement researchers in the country, has demonstrated that 77% of a retirement portfolio's final outcome is determined by the returns of the first 10 years. A bad sequence at the start of retirement, compounded by ongoing withdrawals, can permanently alter the trajectory of a retirement plan that would otherwise have been sufficient.

A Fixed Indexed Annuity addresses the sequence of returns problem directly through a mechanism called the annual reset.

Here is how it works:

At the end of each contract year, any positive credited interest is locked in permanently. It becomes the new baseline. Future market declines cannot touch the gains that have already been locked. The account can only move forward, never backward due to market performance.

The zero floor ensures that in any year the underlying index is negative, the credited rate for that year is 0%, not a loss. The balance on the first day of the following contract year equals the balance on the last day of the prior year, plus any locked gains, minus any income withdrawals.

Annual Reset Illustration: $300,000 FIA Over 5 Years

Cap rate assumed at 10% for illustration. Actual cap rates vary by carrier and product.

The market-exposed account lost ground in Year 3 and spent Years 4 and 5 clawing back. A retiree taking $20,000/year in income from that account during those years locked in the losses permanently. The FIA account held its value in Year 3, compounded forward in Years 4 and 5, and produced more than twice the net gain despite accepting the cap.

A Fixed Indexed Annuity still participates in market upside through its cap and participation rates. It is not a savings account. Retirees do not sacrifice all growth potential to achieve protection. They accept a ceiling on the best years in exchange for absolute protection in the worst years. Over market cycles that include bear markets, that tradeoff has historically produced competitive long-term returns for the accounts that need them most: retirement accounts being drawn down in real time.

For a deeper explanation of how FIA mechanics work, including cap rates, participation rates, and rollover bonuses, see our article on TSP and 401(k) rollovers into FIAs.

Without a structural change to how retirement savings are protected, the next five years present a specific set of compounding risks for anyone age 60 and older:

Inflation above 3% continues eroding the real value of fixed income streams, savings accounts, and CDs. A retiree who planned on $60,000/year buying the same things it bought in 2020 is already operating with a $15,000 annual gap.

Geopolitical instability keeps energy prices volatile, which feeds directly back into CPI and consumer confidence. Each escalation event creates market volatility that a market-exposed retirement portfolio absorbs without protection.

AI-driven economic disruption introduces recession risk by mid-2026 in several credible analyst forecasts. A shallow recession combined with the existing sequence risk environment is a particularly dangerous combination for retirees in the early withdrawal phase.

Social Security insolvency is projected for 2032, just six years away. As we have covered previously, this triggers an automatic 24% benefit cut for every retiree collecting benefits unless Congress acts. A retiree who built their income plan around Social Security as a stable floor now faces a floor that may not hold.

A retiree with $500,000 fully in market-exposed accounts who experiences a 30% decline at age 65 and is withdrawing $30,000 per year may never recover to their original balance. The math of simultaneous withdrawals and losses is permanent, not temporary.

A retiree with the same $500,000 in an FIA experiences 0% in that year, protects their locked gains from all prior years, and continues receiving indexed growth when the market recovers. They continue drawing income without selling at a loss.

This environment calls for a specific response, not a general one.

Step 1: Understand your sequence exposure. Run the scenario. What does a 20% market decline do to your portfolio this year? A 30% decline? If the answer causes you to reduce your income or change your plans, you have unhedged sequence risk.

Step 2: Review your allocation for protected income. Not all retirement savings need to move to an FIA. But having a meaningful portion of savings in a vehicle that cannot lose principal changes the risk profile of the entire portfolio. The protected portion continues providing income regardless of what happens to the market-exposed portion.

Step 3: Request a retirement income analysis. Model your current plan against multiple scenarios including inflation above 3%, Social Security cuts in 2032, and a 25 to 30% market decline in the next 3 years. See what those scenarios do to your income.

Step 4: Get a side-by-side FIA illustration. A carrier illustration takes 20 minutes to review and shows you exactly what a Fixed Indexed Annuity does with your specific balance, your specific age, and the specific income you need. The comparison is factual, not theoretical.

The right plan is the one that holds up under the scenarios that are actually likely, not just the ones you hope will happen.

All Financial Freedom works with people age 60 and older who are navigating this environment and need a retirement plan that accounts for what the market is actually doing. Schedule a free retirement review and let us model your specific situation.

• ◆Brookings Institution, The Fed's Response to COVID-19: brookings.edu
• ◆Congressional Budget Office, How the Federal Reserve's Quantitative Easing Affects the Federal Budget: cbo.gov
• ◆CNBC, Cumulative Inflation Since 2020: cnbc.com
• ◆U.S. Inflation Calculator, Current U.S. Inflation Rates: 2000-2026: usinflationcalculator.com
• ◆Eurasia Group, Top Risks of 2026: eurasiagroup.net
• ◆EY Global, Geopolitics in 2026: World Rewired for Risk: ey.com
• ◆BlackRock, Geopolitical Risk Dashboard: blackrock.com
• ◆McKinsey Global Institute, Notes from the AI Frontier: Modeling the Impact of AI on the World Economy: mckinsey.com
• ◆Dallas Federal Reserve, Young Workers' Employment Drops in High AI Exposure Occupations: dallasfed.org
• ◆AARP, 1 in 5 Americans Ages 50+ Have No Retirement Savings: aarp.org
• ◆National Council on Aging, Addressing the Nation's Retirement Crisis: ncoa.org
• ◆Wade Pfau, PhD, CFA, Sequence of Returns Risk: retirementresearcher.com
• ◆Charles Schwab, Timing Matters: Understanding Sequence of Returns Risk: schwab.com
• ◆Annuity Expert Advice, How the Annual Reset Works on Fixed Index Annuities: annuityexpertadvice.com
• ◆Fidelity, Fixed Indexed Annuity Explainer: fidelity.com
• ◆Kiplinger, What Are Fixed Index Annuities and How Do They Work?: kiplinger.com