--- title: 8 Common, Yet Unnecessary Risks Investors Take in Their Financial Plans description: For efficient wealth management Annapolis and to learn to avoid investment risk, visit , Scarborough Capital Management, financial advisor Annapolis image: https://blog.scmadvice.com/hubfs/wealth%20management%20Annapolis%20Scarborough%20Capital%20Management.jpg --- - [Why Choose SCM?](https://scmadvice.com/why-scm/) - [Our Commitment to You](https://scmadvice.com/our-commitment-to-you/) - [Our Fees](https://scmadvice.com/our-fees/) - [What We Do](https://scmadvice.com/what-we-do/) - [401(k) Plan Management](https://scmadvice.com/401k-plan-management/) - [403(b) Plan Management](https://scmadvice.com/403b-plan-management/) - [Thrift Savings Plan (TSP) Management](https://scmadvice.com/thrift-savings-plan-tsp-management/) - [Health Savings Account (HSA) Management](https://scmadvice.com/health-savings-account-hsa-management/) - [Wealth Management](https://scmadvice.com/wealth-management/) - [Financial Planning](https://scmadvice.com/financial-planning/) - 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Goldsmith](https://blog.scmadvice.com/hubfs/Goldsmith%20Blog.jpg) ###### by [Joshua P. Goldsmith](https://blog.scmadvice.com/author/joshua-p-goldsmith) on January 27, 2026 ###### Categories: - [Investing](https://blog.scmadvice.com/tag/investing) # 8 Common, Yet Unnecessary Risks Investors Take in Their Financial Plans As a financial advisor in Annapolis, MD, I’ve helped countless clients make smarter financial decisions that help put them in control of their futures. Likewise, I’ve seen a lot of people make mistakes that added unnecessary risk to their long-term security.  Unnecessary risk is … well, unnecessary! In my experience, here are 8 common ways this happens, as well as alternatives that can help you avoid them. ### 1. DIY Investing Even if you have a genuine interest in investing, managing your own portfolio may not be the best move. [A study from SmartAsset](https://smartasset.com/financial-advisor/financial-advisor-vs-self-investing) shows that investors who work with a financial advisor can potentially see a higher net return on investments than those who don’t. This can be attributed to a variety of factors, including the fact that a financial advisor analyzes and monitors your portfolio, looking for opportunities to: - Lower expenses and fees - Rebalancing investments so they match your risk tolerance and goals - Help you avoid emotional decisions that could jeopardize your returns Unfortunately, DIY investors often reach out for help once a mistake has been made. Correcting a mistake can be a harder task than helping put an investor on the right path initially. And sometimes, what may feel like a small mistake can have long-term effects, like taking Social Security at the wrong time.   ### 2. Making Dangerous Assumptions About Social Security No matter how much money you save for retirement, Social Security will likely play a role in your monthly income. Still, there are 3 dangerous assumptions many pre-retirees make about Social Security: ***Assumption #1: You’ll Get to Work Until Age 70*** Depending on your birth year, you could receive [up to 32 percent more](https://www.ssa.gov/benefits/retirement/planner/1943-delay.html) in Social Security benefits if you wait to claim these benefits until age 70.  If this is a strategy you plan on using, that’s great. But don’t automatically assume you’ll be able to. It’s estimated that [more than half of adults](https://www.moneytalksnews.com/heres-why-half-of-middle-aged-americans-are-forced-to-retire-early/) retire earlier than expected due to a layoff, medical issues or needing to care for a family member.  ***Assumption #2: Cost-of-Living Increases Will Keep Up with Inflation*** Many pre-retirees assume that Social Security Cost of Living Adjustments (COLAs) will help them keep up with inflation in retirement. Unfortunately, this rarely happens.  The Social Security Administration calculates COLAs based on changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers. If prices in this index don’t increase, there is not a COLA that year.  The [COLA for 2026 is 2.7% to 2.8%](https://www.cnbc.com/2025/09/11/social-security-cola-cost-of-living-adjustment-may-be-higher-in-2026-estimates.html), which means the average monthly benefit will increase to $1,955, about $54 increase per month. ***Assumption #3: Social Security Will Cover Most of Your Income*** Social Security estimates that [40 percent](https://www.ncoa.org/article/how-much-of-my-income-will-social-security-replace/) of the average person’s pre-retirement income will come from Social Security benefits. Yet, they also estimate that 21 percent of elderly married couples and 45 percent of elderly individuals rely on these benefits for [90 percent](https://www.ssa.gov/news/press/factsheets/basicfact-alt.pdf) or more of their income.  The average monthly benefit is $1,975, which means many retirees struggle to get by on only $23,700 a year.   ### **3. Following General Rules of Thumb ** It seems like there are financial rules of thumb for almost everything these days:  - 4 percent is a safe withdrawal rate. - You only need three to six months of expenses in your emergency fund. - Plan on needing 80 percent of your salary in retirement. The problem with these rules of thumb is that they don’t take into account your personal situation. For instance, a six-month emergency fund may not be enough if you’re an entrepreneur with variable income, and you have a spouse and two kids at home.  On the flip side, you may need less than 80 percent of your current salary in retirement if you’re debt-free and invest more than the average person. The moral of the story is, don’t make any big financial decisions based on rules of thumb. They may not apply to your situation.    ### **4. Putting All Your Eggs in One Basket** No matter how promising an investment seems, don’t put all your eggs in one basket. Instead, make sure your portfolio is properly diversified. A lot of investors think they need to contribute large amounts every month, and so they hold off on investing until they can make those big deposits. But that’s a mistake too. It’s not the amount you contribute that matters most. Even a small amount added on a regular basis can make a big impact on your future, as it starts compounding for you.   ### **5. Not Knowing Enough About Your Financial Advisor** Hiring a financial advisor is one of the biggest decisions you’ll ever make. You are putting your entire financial future in this person’s hands, so it’s critical that you do your homework to ensure:  1. That they put your best interests first and disclose any conflicts of interest. 2. They’re experienced. 3. They’re accessible.  If your current advisor (or a potential advisor you’re meeting with) says something that makes you uncomfortable, walk away. [Download our free eBook](https://info.scmadvice.com/choosing-a-financial-advisor?__hstc=199549809.1658f4f6a0c1b8b5324da44fb03f6c45.1607640397182.1608764914658.1608833123208.10&__hssc=199549809.4.1608833123208&__hsfp=1866362888) on how to choose the right financial advisor.   ### 6. **Putting Your Planning Needs Off Until ‘Later.’** If you’ve put off hiring a financial advisor, it may be because you don’t know how to find a good one or you don’t think you have enough money to need one. Whatever your reason is, there’s no better time than now to start planning for your future.  The right advisor should help you create a roadmap to reaching your financial goals. Working toward retirement without a plan is an unnecessary risk that you don’t need to take. ### **7. Not Planning for the ‘What-Ifs’ in Life** Life is full of surprises, and it’s important to plan for these events so you’re not overwhelmed when life goes a different direction. For instance, how would your financial security change if you:  - Developed a chronic illness - Changed jobs - Lost a spouse - Welcomed a new baby or grandchild - Had to retire early Your financial plan should account for the unknowns that may happen in your life, both good and bad.   ### **8. Setting and Forgetting Your Financial, Retirement, and Estate Plans** If you’ve taken the time to create a financial, retirement, or estate plan, congratulations! You’re on the right track toward a secure financial future. But when was the last time you updated those plans? If you can’t remember, you’re taking a lot of risk you may not be aware of.  At Scarborough Capital Management, we recommend clients review their plans *at least* once a year, or any time you experience a major life event, so they can be updated appropriately. Your needs change over time. Your portfolio may not grow as quickly as you anticipated. You may get remarried, change jobs or decide to relocate. Even if there hasn’t been any major change in your life, it’s wise to review your plan to make sure the amount of risk you’re taking in your financial life is still appropriate. ### **How We Can Help** There’s risk in any investment. When you first meet with a financial advisor, you should have reviewed your risk tolerance to determine how much of this risk you’re comfortable with. As a financial advisor in Annapolis, it’s the *unnecessary* risk that many people expose themselves to that concerns me. At Scarborough Capital Management, we specialize in helping busy professionals plan for their futures. As we start a new year, make your finances a top priority. Discuss your situation with a fiduciary financial advisor and fill in any [gaps in your financial life](https://scmadvice.com/financial-planning-in-annapolis-md/) that you may be ignoring. If you’re not sure where to start, contact the Scarborough Capital Management team. A simple conversation can go a long way! 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With affordable 401(k) management services plus full-service financial planning and wealth management, we’re passionate about helping you achieve your financial goals… now and in the future. #### Contact - 1906 Towne Centre Blvd., Suite 260 Annapolis, MD 21401 - **Call:** 410-573-5700 or 800-200-3870 **Fax:** 410-573-5708 #### Navigate - [Why Choose SCM?](https://scmadvice.com/why-scm/) - [What We Do](https://scmadvice.com/what-we-do/) - [About SCM](https://scmadvice.com/who-we-are/) - [Who We Help](https://scmadvice.com/our-clients/) - [Free Resources](https://scmadvice.com/resources/) - [Blog](https://blog.scmadvice.com/) - [Contact Us](https://scmadvice.com/contact-us/) ##### Find on Social: - - **![Broker Check logo](https://blog.scmadvice.com/hs-fs/hubfs/Broker%20Check%20logo.png?width=140&name=Broker%20Check%20logo.png)** **Important consumer information** This site is for informational purposes only and is not intended to be a solicitation or offering of any security and: Representatives of Registered Broker-Dealer ("BD") or Registered Investment Advisor ("IA") may only conduct business in a state if the representatives and the BD and IA they represent (a) satisfy the qualification requirements of, and are approved to do business by, that state; or (b) are excluded or exempted from that state's registration requirements. 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