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The stock market has seen its share of turbulence in recent months, leaving many soon-to-be retirees wondering: Is now the time to get out? But planning for retirement isn’t about reacting to headlines—it’s about understanding your goals and aligning your strategy with long-term needs.
As inflation remains sticky, interest rates stay elevated, and election-year uncertainty looms, investors are understandably anxious. But the decisions you make now—especially if you're within five years of retirement—can significantly impact your income, tax burden, and peace of mind for decades to come.
Start with Two Questions: Why Are You Investing, and When Will You Need the Money?
Before you make any portfolio moves, pause and revisit the basics. The most grounded investors know what their money is for. If you don’t need the funds for another five to ten years, you can typically ride out short-term fluctuations.
Liz Weston, CFP, echoed this in a recent Los Angeles Times column, emphasizing that “money you need in the next few years shouldn’t be in the stock market anyway.” Instead, she suggests parking near-term funds in safer vehicles like high-yield savings or money market accounts.
In other words, not every dollar needs to perform in the same way. Clarifying your timeline helps you segment your assets accordingly—some for growth, some for stability, and some for immediate use.
Build a Portfolio That Can Withstand Market Stress
Volatility isn’t new. But it can feel more threatening when you’re no longer decades away from retirement. The solution isn’t to time the market—it’s to build a plan that doesn’t rely on guessing what it’ll do next.
Diversify Strategically
BlackRock recommends maintaining exposure to equities for long-term growth, but balancing that with fixed income and alternative assets to reduce overall risk. This might include dividend-paying stocks, inflation-protected bonds (TIPS), or short-duration bond funds that are less sensitive to interest rate hikes.
Diversification isn’t just about spreading your investments—it's about choosing assets that behave differently under pressure. That’s what gives your plan resilience.
Reassess Asset Allocation Regularly
Many pre-retirees haven’t updated their asset mix in years, which means they may be carrying more risk than they realize. As Charles Schwab’s retirement planning team points out, “your portfolio should reflect your time horizon, income needs, and risk tolerance—not the allocation you picked when you were 40.”
Make it a habit to review your mix at least once a year, or after any major life or market event.
A Smart Withdrawal Plan Is Just as Important as a Good Investment Plan
Once you enter retirement, the sequence of your withdrawals matters as much as the returns you earn. Withdrawing from your portfolio during a market downturn can lock in losses and jeopardize long-term sustainability. That’s where withdrawal strategies come in.
Flexible Spending is Key
Retirees who can adjust their discretionary spending in response to market conditions are more likely to preserve their assets over time. That might mean reducing travel or big-ticket expenses during down years and resuming them when markets rebound.
Use Bucketing to Match Assets with Time Horizons
A popular strategy among financial advisors is the “bucket approach,” where assets are segmented into short-, medium-, and long-term needs:
- Bucket 1: 1–3 years of living expenses in cash or cash equivalents
- Bucket 2: 3–7 years in conservative investments
- Bucket 3: 7+ years in growth assets like equities
Morningstar strategist Christine Benz recommends this structure as a way to “de-risk” retirement and provide psychological comfort during market swings.
What You Can Do Now to Strengthen Your Retirement Plan
Don’t Panic, Rebalance
Market swings can throw your portfolio out of alignment. Instead of reacting emotionally, use this as an opportunity to rebalance. If equities have dropped, you may actually be underweighted in growth. That’s when disciplined rebalancing makes sense.
Review Your Tax Strategy
In volatile markets, tax-loss harvesting and Roth conversions become particularly powerful. Selling certain assets at a loss can offset gains, while converting pre-tax assets to Roth IRAs during a dip allows for long-term tax-free growth.
Build a Buffer with Cash and Near-Cash Assets
Keeping 12 to 18 months of essential expenses in a high-yield savings or short-term Treasury fund helps reduce the pressure to sell investments when markets dip. It also gives retirees flexibility to wait for a recovery.
Consider Delaying Social Security
If you can cover your income needs through other sources, delaying Social Security until age 70 increases your monthly benefit by roughly 8% per year past full retirement age. Liz Weston notes this is “one of the best inflation-protected income sources available.”
Conclusion
Market volatility is unsettling, but it doesn’t have to derail your retirement. With a structured, purpose-driven plan, you can weather downturns without making costly mistakes. The key is clarity: know what you own, why you own it, and how it supports your long-term goals.
Retirement planning isn’t about predicting markets. It’s about preparing for what you can’t control—and building a plan that can hold up when tested.
Sources
Los Angeles Times
Business Insider
BlackRock
TIAA
Charles Schwab
AP News
Investopedia
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