Navigating Market Volatility in Retirement

The financial landscape is ever-changing, and market volatility can pose challenges for retirees seeking financial stability at any given time. 

Retirement is a significant milestone in life that many of us look forward to. After years of hard work, we should be able to enjoy our hard-earned nest egg and live comfortably. But too many of us make the mistake of taking our nest egg for granted. Retirees in the U.S. broadly continue to report that they have enough money to live comfortably. In all, 43% of non-retirees think they will have enough money to live comfortably, while 77% of retirees — unchanged from last year — say they currently do.

This blog will explore strategies to help navigate market volatility and help secure a peaceful retirement. Here’s what you should know.

What is Market Volatility?

Market volatility refers to the degree of fluctuation or instability in the prices of financial assets within a given market. It reflects the rapid and significant price changes over a short period. Various factors, such as economic conditions, geopolitical events, and unexpected news, can drive market volatility. High levels of market volatility can result in rapid price swings, making it difficult to predict the future direction of asset prices. 

According to an Allianz Life study, 77% of Americans believe the market will continue to be volatile throughout 2023. Additionally, more Americans are buckling down for the long haul. If markets continue to exhibit volatility throughout 2023, 65% say they’ll adjust their retirement and investment plans. 

Fluctuations in asset prices can result in the erosion of retirement savings, potentially leading to a reduced income stream or even running out of money prematurely. To help mitigate the impact of market volatility, retirees must adopt strategies that provide a buffer during challenging times. 

Diversification Helps Shield Against Volatility

Diversification is a tried and tested strategy that can help protect your retirement savings from market volatility. You can help reduce the risk of significant losses during market downturns by spreading your investments across different asset classes. Diversification allows you to better capture gains in some areas while helping to minimize potential losses in others, helping to provide a more stable portfolio. Here’s why diversification is an essential strategy for navigating market volatility in retirement:

  1. Spreading Risk: By investing in a mix of assets, you can help reduce the impact of a single asset’s poor performance on your overall portfolio.
  2. Potential for High Returns: Different asset classes have varying return patterns. While stocks may provide higher long-term returns, bonds offer stability and income. Diversifying helps you capture gains from different asset classes and improve investment returns.
  3. Smoothing Out Volatility: Diversification can help smooth out the financial bumps by helping to reduce the impact of extreme market fluctuations on your portfolio. While one asset class may experience significant volatility, others can lead to a consistent and less volatile overall portfolio performance.
  4. Asset Allocation: Asset allocation involves distributing your investments among different asset classes based on risk tolerance, investment goals, and time horizon. By diversifying your portfolio, you can help align your asset allocation with your retirement objectives, helping to balance risk and potential returns.

By spreading your investments across different asset classes, you can help reduce the risk of significant losses and enjoy a more stable portfolio. Regularly reviewing and rebalancing your portfolio with the help of a financial advisor can help ensure it remains aligned with your long-term goals.

Regular Portfolio Review and Rebalancing

Regular portfolio review and rebalancing are crucial to managing market volatility during retirement. Regular Portfolio reviews are a great opportunity for you to assess your progress toward your financial future, and help ensure your portfolio hasn’t drifted away from the asset allocation that best matches your risk tolerance and time horizon. Here are some key points to consider when conducting a portfolio review:

  1. Aligning with Retirement Goals: Your investment strategy should reflect your specific retirement goals, whether maintaining a certain standard of living or leaving a legacy for future generations. Regularly reassessing your portfolio helps you realign your investments and make any necessary adjustments.
  2. Assessing Risk Tolerance: Market volatility can significantly impact your portfolio, and you may need to adjust your risk exposure accordingly. Assess your comfort level with fluctuations in the market and consider whether your portfolio reflects an appropriate level of risk for your retirement stage.
  3. Rebalancing for Stability: Your portfolio may become unbalanced when asset classes outperform others. Rebalancing may involve selling some of the outperforming assets and buying more of the underperforming asset to restore the desired asset allocation. This process helps ensure that your portfolio remains diversified and can withstand market volatility.

Remember, regular portfolio reviews and rebalancing should be done in consultation with a trusted financial advisor who understands your retirement objectives. Reviewing your retirement portfolio with your advisor on a regular basis is just one of many ways you can take steps towards a life of financial independence and confidence.

Embrace Long-Term Investing

Retirement is typically a long-term endeavor, potentially lasting for decades. Adopting a long-term investment mindset focusing on compounding is essential. Compounding is where your investment returns generate additional returns, helping to lead exponential growth. Short-term market fluctuations may cause temporary declines, but history has shown that the market will recover over time.

Consider this: if you invested in the stock market during significant downturns like the dot-com bubble burst in 2000 or the global financial crisis in 2008, you would have witnessed significant declines in the short term. Investors who stayed the course and remained invested reaped the rewards as the market rebounded its upward trajectory over the long run.

Focusing on your long-term goals helps you to ride out short-term volatility without succumbing to panic or making impulsive investment decisions. It’s important to remember that attempting to time the market is challenging and often counterproductive. Instead, maintaining a disciplined approach and remaining invested can position you to capture the market’s growth potential over time.

Maintain an Emergency Fund

Emergency funds are a safety net to protect retirees from unexpected expenses or income disruptions caused by market volatility. Healthcare costs are a great example of a cost that fluctuates as you age. Someone aged 65 has a 70% chance of needing long-term care services and supports in their remaining years.

Maintaining an emergency fund covering at least six to twelve months’ worth of living expenses can help you in the long run. Having this buffer allows you to weather market downturns without having to tap into your long-term investments at unfavorable times. This financial cushion helps provide peace of mind and enables retirees to navigate challenging times without compromising their retirement plans.

Seek Professional Guidance

Navigating market volatility in retirement can be complex and challenging. Consider working with a financial advisor (preferably a Fiduciary) who’s services include tried and tested strategies for retirement income planning. At Johnson Wealth and Income Management, our team of professionals can help you with the following:

  • Help you comprehend and leverage employer matching contributions.
  • Help enhance your investment diversification.
  • Advise on the most suitable type of retirement account (Roth, Traditional IRA).
  • Help you to capitalize on Iowa state tax breaks.
  • Identify potential portfolio risks and recommend strategies to help mitigate them.

Market volatility can be emotionally taxing, especially for retirees dependent on their investments for income. Working with a Fiduciary advisor like Matthew P. Johnson gives you access to high-quality investment advice and guidance. We are offering you the tools to make well-informed decisions about your investments.

Final Thoughts

Market volatility is an inherent part of investing, and retirees must navigate it wisely to ensure a secure financial future. Seeking professional advice can help you weather the storm of market volatility and stay on track toward retirement. With proper planning and a well-thought-out strategy, you can better overcome the challenges posed by market fluctuations.

At Johnson Wealth and Income Management, we are committed to providing exceptional guidance and support to our clients. Our team of knowledgeable advisors is here to help you navigate market volatility and build a secure financial future. If you’re ready to embark on your retirement investment journey, contact us today to schedule a complimentary consultation. 


All written content on this site is for informational purposes only. Opinions expressed herein are solely those of Johnson Wealth & Income Management and our editorial staff. Material presented is believed to be from reliable sources; however, we make no representations as to its accuracy or completeness. Investing involves risk. There is always the potential of losing money when you invest in securities. Asset allocation, diversification and rebalancing do not ensure a profit or help protect against loss in declining markets. All information and ideas should be discussed in detail with your individual advisor prior to implementation. The presence of this website, and the material contained within, shall in no way be construed or interpreted as a solicitation or recommendation for the purchase or sale of any security or investment strategy. In addition, the presence of this website should not be interpreted as a solicitation for Investment Advisory Services to any residents of states where otherwise legally permitted to conduct business. Fee-based financial planning and Investment Advisory Services are offered by Sound Income Strategies, LLC, an SEC Registered Investment Advisory firm. Johnson Wealth & Income Management and Sound Income Strategies LLC are not associated entities. Johnson Wealth & Income Management is a franchisee of the Retirement Income Store. The Retirement Income Store and Sound Income Strategies LLC are associated entities. © 2023 Sound Income Strategies.