Five Tips to Live Through a Volatile Market as a Retiree

Ted Hughes |

Whatever the cause, volatile markets always bring an immense amount of anxiety among retirees who have less time to make up for losses. Here are some tips to minimize the impact of volatile markets on a retirement income plan.


1. Stay the Course

Market volatility is the main catalyst behind a lot of bad financial behaviors – most specifically – buying high and selling low. Retirees often overreact when the market drops and divest some of their equities. Fight the urge to cut and run, make sure you are properly advised and avoid making decisions just based on emotions.


2. Tap Your Cash Bucket

Consider using the cash allocation in your accounts for withdrawals to delay the need to sell when the market is down. If you've planned for the inevitable downturns, you should have enough in cash and cash-like investments to cover two to three years' worth of living expenses.


3. Have Alternative Income Sources

If you cannot be flexible with your income needs in retirement, you might want to consider figuring out another way to generate income. One strategy is to secure enough guaranteed income sources to cover your basic retirement needs.


4. Rethink Your Withdrawal Strategy

If you don't have other income to offset lower withdrawals, consider deferring gifts, trips and other discretionary expenditures until the market stabilizes. Keep in mind that your spending changes (and typically declines) in retirement. You may find that cutting back is more doable than you think.


5. Review of Investment Income

Some retirees consider generating income from dividends or interests instead of selling shares. This should protect the principal, which will assist in benefiting from a market recovery.    Also, if you are spending down assets in a down market, check the allocation. If your allocation has moved towards bonds in the downturn, sell the bonds first, allowing the stocks to recover in a market recovery.


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