Didn't Anyone Tell You Investing Rules Change in Retirement?
Market volatility isn't something those near retirement can afford to just ignore. They need to have a multifaceted plan to ramp back their risk and protect themselves.
If you’re close to retirement or already retired, merely reacting to the latest bout of market volatility, viewing it as a warning, may not be enough. It’s time to sit up and take notice, understanding what a larger potential correction could do to your financial situation.
Could a market correction, like the one we experienced a decade ago, sink your retirement plans? For those near retirement, a 15% to 20% market decline likely wouldn’t make a big change in retirement lifestyle. However, a downturn of 30% to 40% could be catastrophic.
SEE ALSO: Are You on Track? Financial Planning Goals for Every Decade of Your Life
Instead of hiding and doing nothing (which could be a big mistake) or panicking and abandoning your plan altogether (which could be an even bigger mistake), why not consider taking some defensive measures? If you’re counting on your investments for income, you may not be able to just hold on and wait out another rough market cycle. Your savings will now be subject to “sequence of return risk.” That means, if the market is down and you need the income, or if you are 70½ and taking RMDs you may have to take the money while you accounts are down! The markets will typically bounce back, but your accounts may not.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Now may be a great time to make the shift from a portfolio built for growth and accumulation to one that’s about income, wealth preservation and tax advantages. Two questions to ask yourself:
- If you’re close to retirement or already retired, and the market goes up 20%, will it change the way you retire?
- If the market goes down 40%, will that change the way you retire?
If you answered NO and then YES , here are some steps to take to help safeguard your retirement future:
Take a fresh look at your goals as you transition from working to retirement.
The clearer you are when envisioning and defining your goals, the easier it should be to reshape your financial plan to achieve them. Think about it: If you’re going to bake a pie, you begin with the end in mind. You choose the ingredients, purchase them at a good price and prepare them in a certain order to make the best pie you can.
Creating a wealth-preservation plan should work the same way. Up until now, you may have had a hodgepodge of investments amassed with one goal: accumulation. But in retirement, your portfolio could benefit by being more specific. What investments, products and strategies will get you where you want to go?
Build an income plan that can help keep you afloat if the market crashes.
What type of guaranteed or reliable income sources will you be living on? Social Security, a pension, real estate, annuities, bonds? These retirement “paychecks” can help serve as your lifeboat: If they provide enough money to cover your basic living expenses, or close, you won’t feel the need to jump out of the market should your investments flounder a bit.
In the current interest rate environment, bonds have become a more challenging place to get income, so you may want to consider indexing products as an alternative. Insurance companies now offer indexed annuities and life insurance, which are fixed products that allow you to participate in a percentage of the market’s upside while protecting you from a loss. (Like everything else, no one product can fit everyone’s needs, so find a fiduciary who will recommend the ones that best fit your needs.)
Consider a more conservative investment plan.
The risks you’re willing to take in your working years can be more dangerous in retirement, when you’re pulling from your nest egg rather than contributing to it. That doesn’t mean you should eliminate all risk. You’ll need to hold inflation at bay if you want to be able to afford a long life in retirement. But you should consider minimizing the impact a market downturn can have on your portfolio. Investments that fluctuate with the market, such as stocks and bonds, need proper diversification to reduce volatility risk.
Mutual funds and ETFs have become popular because they’re an easy way to diversify, but they’re still subject to the market’s whims, and it’s easy to duplicate holdings. Take the time on your own or with your adviser to go through the positions you hold and make sure they match up with your objectives.
See Also: Retirement Requires a Shift in Thinking
Don’t overlook the importance of tax efficiency.
When you were working, you probably asked your tax preparer to save you as much money as possible on your return each year. Retirement planning, though, is all about the long journey. If you have all your money in a 401(k) or some other pretax account, you could end up running into a wave of taxes in retirement. It’s crucial to have a plan for when and how much you’ll pull from your retirement accounts and how those withdrawals will work with your other income sources.
You may also want to convert some money to a Roth account or find another strategy to reduce the tax hit you could take in retirement. Due to the deficit, some feel taxes are going up in the future and that the tax brackets today may be the lowest we’re are ever going to see in our lifetimes.
Work out the basics of your legacy plan sooner rather than later.
Of course, your primary retirement planning objective is to be sure you don’t run out of money during your lifetime. That can make legacy planning a challenge, especially when you’re concerned about market volatility. But if you plan now, it could save you and your loved ones money later. Talk to an experienced professional about life insurance, trusts and other strategies that will ensure your loved ones get what you wanted them to have. Don’t wait until your health or mind is failing to put this part of your plan in place.
If the latest ups and downs in the market made you a little queasy, don’t fret. Maybe you didn’t make the changes you wanted at the top of the market, but you may be close enough. There’s no time like the present to right your ship and sail forward with confidence.
See Also: I Wish I Had Done This Years Ago: All Too Common Financial Regrets
Kim Franke-Folstad contributed to this article.
Investment advisory services offered through Ladin Financial Group Inc., a Registered Investment Advisor in the state of Florida. Insurance products and services are offered through Ladin Tax & Financial Group. Ladin Financial Group and Ladin Tax & Financial Group are affiliated companies. Investing involves risk, including the potential loss of principal. Our firm does not provide, nor is any statement contained here intended to provide tax or legal advice. All individuals are encouraged to consult with qualified professionals prior to making any decisions about their personal situation.
-
Turning 65 in 2026? Here Is Exactly How to Sign Up for MedicareWhether you’re months away from your 65th birthday or plan to work past retirement age, here are the steps to secure your Medicare coverage and avoid costly mistakes.
-
A Free Tax Filing Option Has Disappeared for 2026: Here's What That Means for YouTax Filing Tax season officially opens on January 26. But you'll have one less way to submit your tax return for free. Here's what you need to know.
-
Georgia Income Tax Elimination: What the 2026 Tax Cuts Mean for YouState Tax Georgia lawmakers aim to axe the state income tax by 2032. We break down the $16 billion fiscal shift, the fate of the state surplus, and which tax breaks are on the chopping block.
-
Is a Caregiving Strategy — for Yourself and Others — Missing From Your Retirement Plan?Millions of people over 65 care for grandkids, adult kids or aging parents and will also need care themselves. Building a caregiving strategy is crucial.
-
6 Financially Savvy Power Moves for Women in 2026 (Prepare to Be in Charge!)Don't let the day-to-day get in the way of long-term financial planning. Here's how to get organized — including a reminder to dream big about your future.
-
Private Equity Is Fundamentally Changing: What Now for Investors and Business Owners?For 40 years, private equity enjoyed extraordinary returns thanks to falling rates and abundant credit. That's changed. What should PE firms and clients do now?
-
I'm a Real Estate Expert: 2026 Marks a Seismic Shift in Tax Rules, and Investors Could Reap Millions in RewardsThree major tax strategies will align in 2026, creating unique opportunities for real estate investors to significantly grow their wealth. Here's how it works.
-
When Can Tax Planning Be an Act of Love? This Family Found OutHow can you give stock worth millions to a loved one without giving them a huge capital gains tax bill? This family's financial adviser provided the answer.
-
Forget Job Interviews: Employers Will Find the Best Person for the Job in an Escape Room (This Former CEO Explains Why)Escape rooms can give employers a better indication of job candidates' strengths than a standard interview. Here's how your company can get on board.
-
The Paradox Between Money and Wealth: How Do You Find the Balance?Wealth reflects a life organized around relationships, health, contribution and time — qualities that compound differently than money in a mutual fund.
-
Billed 12 Hours for a Few Seconds of Work: How AI Is Helping Law Firms Overcharge ClientsThe ability of AI to reduce the time required for certain legal tasks is exposing the legal profession's reliance on the billable hour.
