NEW YORK (TheStreet) -- Retirees can be especially vulnerable to sudden financial troubles and expenses -- anything from unexpected bills for auto or home repairs, legal proceedings, or hospitalizations, to equity-draining issues like stock market downturns, thefts, rising taxes or even inflation.
And seniors recognize that risk: An unexpected financial emergency was the greatest money worry among those polled by a 2015 Northwestern Mutual Planning and Progress study. Another top concern was long-term health care.
"Longevity risk is a key consideration to plan for," said Rebekah Barsch, vice president of planning and sales at Northwestern Mutual. "We are all living longer and will potentially need some type of care later in life."
Long-term care insurance offers both lifestyle protection and asset protection for longevity, but not every financial emergency can be prevented with insurance.
Stock sell-offs, for example, are a hard-to-predict circumstance that require judicious investors to have some kind of hedge.
"Losing an important source of income in retirement can create significant problems," said Greg De Jong, certified financial planner and financial advisor with Savant Capital Management in Naperville, Ill. However, he says, "leaving substantial amounts in low-yielding bank deposits because it lets you sleep well at night may no longer be a smart approach."
"The right annuity can provide principal protection and protection of prior gains while safeguarding a client's assets from market downturns," said Kyle O'Dell, president with Secure Wealth Strategies in Englewood, Colorado.
A broker or financial adviser can help investors determine which low-cost annuity is right for their financial situation.
"With this type of product, the client needs to understand that they probably won't receive the full upside of the market when things are going well, but they can certainly protect themselves from a correction in the market," said O'Dell.
Although retirees often fall into lower tax brackets as their income declines, tax rates rarely stay the same -- and neither does inflation.
"The biggest complaint I hear from current retirees is paying too much in taxes," O'Dell said. "Just in the last couple of years, we have seen the capital gains rate increase from 15% to 20% with a Medicare tax added on top of it."
To protect themselves from the possibility of rising tax rates, pre-retirees can squirrel away money in investment vehicles such as Roth IRAs, from which disbursements are tax-free.
"When you have money in places that are tax-free, you can manage your tax bracket to an extent during retirement," said O'Dell. "Inflation is the silent killer, and if we see high inflation periods again, retirees could have a tough time keeping up with paying for food and health care needs."
Retirees can also stash their money in investment vehicles that are defensively managed, such as ETFs, bonds and mutual funds, to further guard against inflation. "These types of investments should help clients keep up with and hopefully outpace inflation in the long run," said O'Dell.