Market volatility is rattling investors across the country, and for those within striking distance of retirement, the swings can feel especially threatening.
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Market volatility is rattling investors across the country, and for those within striking distance of retirement, the swings can feel especially threatening. Unlike younger investors who have decades to recover from downturns, people nearing retirement are working with a finite pool of savings — and a poorly timed loss can upend years of careful planning.
Market volatility refers to the rate at which asset prices rise and fall over a given period. When markets are volatile, stock values, retirement accounts and investment portfolios can shift dramatically within days or even hours, driven by economic uncertainty, geopolitical events, inflation data or changing interest rates. Historically, markets have recovered from downturns over time, but the speed and depth of any given recovery is never guaranteed.
Mike Lacy, a financial advisor at Alloy Wealth Management in Charlotte, said the stakes are meaningfully different for people in or approaching retirement than for those earlier in their careers.
For younger investors, a 10% portfolio drop is painful but recoverable — there are years of future contributions and market growth ahead. For someone in their first year of retirement, that same loss can trigger a cascading problem known as sequence-of-returns risk: drawing down a shrinking portfolio early can permanently diminish how long savings last, even if markets eventually rebound.
The antidote, Lacy said, is not picking better stocks or timing the market. It is having a plan — and staying committed to it.
“Have a plan and stick to the plan,” Lacy said. “Chasing market returns, being overly worried about what you’re hearing on TV or what you’re reading on the internet, that can skew a portfolio.”
Lacy emphasized that the fundamentals of sound investing do not change based on age or proximity to retirement. The discipline required is the same; what shifts is how much room for error exists.
“It’s just easier when you’re young because when you’re 30 years from pulling on those accounts, it doesn’t hurt so much to see a loss,” Lacy said. “But a 5 or 10% loss when you’re in your first year of retirement, it can be terrifying if you don’t have that plan.”
For those who have not yet built a retirement income plan, Lacy said there is no reason to wait, even amid current turbulence.
“Never too late,” Lacy said. “It’s always a good time to do the right thing.”
The first step, he said, is establishing a guaranteed income baseline: a floor of retirement income that does not depend on market performance. That might include Social Security, annuities or pension benefits. Once that foundation is in place, investment growth can serve as upside rather than a lifeline.
“Let’s guarantee income. Let’s make sure that we know in retirement what that base level of income is,” Lacy said. “Once we have that, then we can look at how the market can help increase that income. We just don’t ever want the market to decrease retirement income.”
For those in the middle stretch of their careers, Lacy recommended a periodic portfolio review to ensure current holdings still align with future goals. No dramatic repositioning is necessary, he said, just mindful attention to the plan already in place.