Navigating market volatility in retirement can feel like an uphill climb when you’re preparing for or already living off your savings, putting the nest egg you’ve worked so hard to build at risk. In fact, recent research has found that overlooking market swings can erode roughly 2.4% of your wealth each year.
Letting those ups and downs run unchecked may leave you in a tough spot. Here are some practical steps for building a retirement strategy that stays sturdy through every twist and turn.
Strengthen Your Strategy With Broad Diversification
You can’t stop every market swing, but you can soften the impact. By spreading your savings across stocks, bonds, index funds, and even real estate or commodities, you can lower the risk of one slump wiping out your gains. If one asset class dips, another may hold steady or even climb, keeping your overall balance in check.
This approach won’t erase volatility, but it can turn wild ups and downs into manageable shifts that you can weather over the long haul when you’re navigating market volatility in retirement.
Reframe Volatility As Opportunity
Viewing volatility as a buying opportunity rather than a threat can give your retirement strategy a real edge while giving you a sense of ease.
Research suggests that investors who kept funding their retirement plans through the 2007-2013 financial crisis saw their balances climb 86% on average, simply from buying low and holding on through the rebound.
By staying the course, you can turn a downturn into a chance to strengthen your long-term position and make navigating market volatility in retirement an exercise in patience rather than a cause for panic.
Avoid the Pitfalls of Trying to Time the Market
You might think you can guess the market’s next move, but timing the market demands near-perfect accuracy. If you miss even a handful of the market’s best days, you could see your long-term gains plummet.
Over the past 30 years, skipping the S&P 500’s 10 top days would have cut your returns in half, and missing the 30 best days would have slashed them by 83%. Rather than trying to hit every peak and trough, stick with a plan that matches your goals and comfort with risk.
Make changes only when your own needs shift, not because you’re betting on the market’s next turn.
Create a Buffer to Safeguard Long-Term Investments
When navigating market volatility in retirement, you might need cash you can tap without touching your investments. For this reason, it’s wise to place six months to two years of your living costs in an easily accessible account.
That stashed cash can enable you to handle surprise bills when markets dive. Instead of selling stocks at a loss, you can draw on your reserve and wait for prices to recover. Over a prolonged downturn, this buffer can shield your savings from permanent hits.
Schedule Periodic Checkups on Your Portfolio
To prevent emotions from motivating your decisions around navigating market volatility in retirement, schedule a yearly checkup of your holdings. At each review, see if any asset class has drifted more than a certain percentage (generally 5%) from your target mix. If it has, sell what’s climbed above its range and buy what’s dipped below to restore your original allocation.
A review is also a chance to check your assumptions. Has your expected retirement horizon changed? Do you still plan for the same annual spending?
If you experience life changes, such as if you move, retire later or earlier, or face new expenses, update your targets before you rebalance. That way, every adjustment reflects both the market’s movements and your personal goals.
Get Professional Help Navigating Market Volatility in Retirement
Market ups and downs can stretch your retirement savings to the limit. You need sound strategies to cover your various expenses and avoid outliving your income.
Prosperity Financial Solutions assists clients nearing and in retirement in adjusting their portfolios, managing risks, and keeping their plans on track. Call (561) 207-6213, email ramsden@brookstoneadvisor.com, or book a 30-minute complimentary call online.
About David
David Wilcox is president and cofounder of Prosperity Financial Solutions, a financial services firm, based in Palm Beach Gardens, FL, specializing in retirement planning, estate planning, and investments. Since 1987, David has been assisting pre-retirees, retirees, and investors with comprehensive retirement planning, helping them preserve their wealth, increase their retirement income, and avoid common financial mistakes. Prioritizing financial education, he employs strategies to instill confidence and comfort in his clients as they make decisions and move toward their ideal financial future. He also highly values building relationships with clients and strives to make them feel like part of his family.
David holds an associate’s degree from Broward College, a bachelor’s degree from Florida State University, as well as the Life Underwriter Training Council Fellow (LUTCF®) and Long-Term Care (CLTC®) certifications. A firm believer in professional education and participation, he is a member of the Global Financial Association, a member of NAIFA (National Association of Insurance and Financial Advisors), and is a Certified National Long-Term Care instructor. Teaching and mentoring other financial advisors, David presents dozens of seminars and workshops on long-term care and investment planning throughout the country. Outside of the office, family man David enjoys golfing, fitness, and spending time with his kids on the boat, going for long walks, and traveling to new places. He wants to provide a positive example for his children and show them that it’s never too late to follow your dreams. To learn more about David, connect with him on LinkedIn.