Market Volatility Tests More Than Just Portfolios — It Tests Soon-to-Be Retirees' Nerves: Are You Passing?
Market downturns often trigger more than just a dip in your account balance — they test your emotional resolve. Having a well-built strategy that acts as a buffer can help you stay the course when the market gets rocky.
For many Americans, recent market swings have been emotionally draining. These volatile moments in the market can create uncertainty and may influence how people feel about their financial future in retirement. As markets go down, financial stress can often go up.
In the 2026 Annual Retirement Study* from the Allianz Center for the Future of Retirement®, two in three Americans (67%) said they worry more about running out of money than death.
That concern has climbed steadily over the past five years, up 10 percentage points since 2022. This worry is driven by rising costs, healthcare concerns and market volatility.
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Market drops trigger anxiety
Many Americans are tuned in to how the market is performing each day. The majority of Americans (57%)* said they feel anxious about their future financial well-being when their retirement accounts suffer losses due to a market drop. Half say they immediately check their retirement accounts after a dip.
Watching the balance fall in your retirement accounts can feel like watching years of hard work disappear. But it's important to keep in mind that over the long term, the market has historically provided positive returns.
Reacting to short-term volatility can leave a lasting, and likely negative, impact on retirement security.
Still, more than one in three Americans (34%)* say they typically withdraw money from investments to avoid further losses when the market experiences a significant decline.
While cutting your losses may feel proactive, selling during a downturn locks in those losses and may derail a long-term financial strategy. For those who still have decades before retiring, time is on their side for recovery.
This makes it concerning that 46% of Millennials* said they pull money out of the market during a downturn. If young investors continue to accumulate assets in a down market, the volatility can even work to their advantage by buying when prices are lower.
If young investors stay in the market, then history has shown the market could rebound before they intend to touch those accounts.
For those approaching retirement or who have recently retired, a down market can have a big impact on outcomes. They don't have the time to ride out a market downturn.
The years just before and after retirement are referred to as a "fragile decade," because withdrawals taken during market downturns can reduce the longevity of a portfolio, which can cause anxiety around market volatility during this period.
Losses early in retirement can be harder to recover from because you are withdrawing money at the same time the portfolio is trying to rebound. In this case, short-term declines can have a material effect on retirement income.
The role of risk management in a retirement strategy
Many may have these reactions to market volatility because it exposes their lack of planning for retirement. Nearly half of Americans (48%)* said they do not have a written financial plan.
Without a road map, Americans don't know how to navigate through a detour or bumps in the road.
While we cannot predict when market volatility will happen, history shows that it has occurred over time. A strong retirement plan incorporates strategies to manage the risk posed by market volatility.
Avoiding the market altogether isn't advised to address the risk — market participation can be critical to manage other risks such as inflation.
Incorporating risk management within a retirement strategy can help align risk appetite with desired retirement outcomes. If risk is not accounted for, then it could signal the need to consult a financial professional.
A financial professional can create a written financial plan that can help create structure and confidence around risk and controllable factors.
A written financial plan provides a guide when volatility strikes. It will identify your retirement income sources and assign roles to the different assets in your portfolio.
It can document how a scenario was anticipated and what strategies are in place to address it. Without that guide, it can be easy to react emotionally rather than stay the course.
Building a reliable strategy for uncertain markets
Market volatility isn't new, and it isn't going away. What changes is how prepared people feel when it arrives. A retirement strategy isn't about avoiding uncertainty. It's about planning for it.
It is important to incorporate a level of protection from market volatility into your strategy while accumulating assets and when drawing down on those assets for retirement income.
Some financial products, like defined outcome exchange-traded funds (ETFs), have a buffer that can help limit losses in a down market.
As you move from accumulation into retirement, you may plan to shift how your assets are spread across asset classes to diversify and allocate more toward financially conservative approaches.
It also helps to ensure your essential expenses are covered. One strategy designed to address market risk is to have reliable, stable, secure sources of income to cover essential expenses such as housing, food, utilities and healthcare.
That way, you will not have to withdraw from your more variable assets when the values are down just to pay bills.
Social Security is an important source of reliable, increasing income for many Americans, but it is not enough to be the sole source of retirement income for many. So there is often a gap between essential expenses and Social Security benefits.
Other sources of guaranteed income like annuities can help fill in that gap and provide safe guaranteed income** that cannot be outlived*** and, in some cases, can increase, complementing Social Security.
Knowing that you have strategies in place can help make it easier to go through periods of market volatility. By addressing risks head on and incorporating risk-management strategies alongside growth, Americans can feel more prepared to weather market turbulence without losing sight of the long term.
Volatility may test your nerves. But a well-built strategy helps ensure it doesn't derail your financial future.
* Allianz Center for the Future of Retirement® conducted the 2026 Annual Retirement Study in January 2026 with a nationally representative sample of 1,000 respondents age 25+ with an annual household income of $50k+/$75K (single/married) OR investable assets of $150k+. The Allianz Center for the Future of Retirement® produces insights and research as a part of Allianz Life Insurance Company of North America.
** Guarantees are backed solely by the financial strength and claims-paying ability of the issuing insurance company.
*** Assumes all terms of the contract are followed.
Annuities can help meet long-term retirement goals by offering tax-deferred growth potential, a death benefit during the accumulation phase, and a guaranteed stream of income at retirement.
Investment strategies, such as diversification and strategic asset allocation, do not ensure a profit or protect against loss.
Defined outcome ETFs are subject to investment risk, including loss of all principal invested.
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