If you’re retired or nearing retirement, market uncertainty can feel unnerving. After you’ve spent decades working, saving, and planning, it’s natural to be concerned when the market dips or prices start rising.
But while market swings can spark anxiety, they’re also a normal part of long-term investing. Understanding how to manage them and avoid emotional decision-making can help you feel more confident in your plans and financial future.
Here are five considerations to keep in mind when the market feels unpredictable.
1. Realize Market Ups and Downs Are Nothing New
It’s common to feel overwhelmed when the economy seems uncertain, but market fluctuations have always been a part of investing. For example, over the last 60 years, the S&P 500 has had years when it’s risen by as much as 37.6% and fallen as much as 37%. Yet, during the same period, the average annualized returns of the S&P 500 have been just over 10%.
Recognizing these long-term patterns can provide perspective for retirees and those approaching retirement. Short-term losses can feel painful in the moment, but historical trends show they tend to recover over time. That’s why focusing on your long-term goals is more important than reacting to day-to-day headlines.
2. Review Your Investment Approach
Market uncertainty can be a good time to pause and review your investment strategy. While there’s no one-size-fits-all solution, there are a few approaches you may want to consider to help you stay positive during tough times.
Staying Invested
- Selling during a downturn may lock in losses. Some investors choose to stay the course, focusing on the long-term plan with their portfolios.
- This approach may create some short-term nerves, but it can help you avoid trying to time the market—something that’s challenging to do.
Rebalancing
- Over time, some investments may grow faster than others, shifting your original mix of assets. Rebalancing can help bring your portfolio back in line with your goals and risk tolerance.
- During times of market change, it could be worth checking whether your current mix still reflects your original plan.
Diversification
- Having a variety of investment types, such as stocks, bonds, and cash equivalents, may help reduce your overall risk.
- While diversification doesn’t guarantee against loss, it can help smooth out the ride when certain parts of the market are struggling.
Each of these approaches has potential pros and cons. Speaking with a financial professional about your personal timeline, income needs, and risk tolerance can help you find what may work well for you.
3. Consider Your Income and Withdrawal Needs
When you’re living in retirement or planning to soon, having a steady income is often a top priority. In a period of market uncertainty, it may help to plan ahead of time to ensure you have short-term needs covered so you don’t need to sell investments at a potential loss.
Some retirees look into building a larger cash cushion or using products, like certificates of deposit or annuities, to help with predictable income. Others may choose to adjust withdrawal strategies temporarily to give their investments more time to recover.
If you’re not sure how market changes could affect your income, it may be worth reviewing your spending plan or seeking input from a financial professional for your retirement planning needs.
4. Think About Your Risk Tolerance
Risk tolerance is always moving. An acceptable level of risk at 45 may feel different at 65 and beyond—and market uncertainty can also impact your comfort with risk. That’s why it’s helpful to revisit it from time to time.
Some retirees and investors may prefer shifting to a more conservative mix of investments as they age. Others may want to keep a balance between growth and preservation. There’s no single correct answer, but being honest and reflective about your comfort levels can help guide decisions and find the fit that works for you.
If you haven’t considered your risk tolerance in a while, this may be a good opportunity to think about how much risk you’re willing and able to take on during uncertain times.
5. Don’t Let Fear Drive Long-Term Decisions
Emotions can run high when the market drops, especially when you’re relying on savings to support your lifestyle. However, making quick or emotional decisions in a moment of panic can have long-term impacts.
Instead, consider asking yourself if your goals have changed or your timeline has shifted. If the answer is no, you may not need to make big changes before you’re ready.
Even in times of market uncertainty, many retirees are comforted by focusing on what they can control, such as their spending, saving, and how assets are allocated, rather than what they can’t.
Market Changes Are Normal—They Don’t Have to Derail Your Plans
It’s understandable to feel nervous when markets are unpredictable. But remember, you’ve gone through changes before and don’t have to navigate uncertainty alone. Whether you’re adjusting to current conditions or planning for the future, there are steps you can take to stay on track and feel more confident about your financial journey.
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