5 tips when retiring amid market volatility

In a turbulent market, diversification becomes especially important

An illustrated image of two hourglasses with a person carrying a coin walking rope between them
A survey found just 27% of retirees are confident they'll be comfortable in retirement
(Image credit: Yossakorn Kaewwannarat / Getty Images)

The market turbulence driven by the pandemic may have started to wane, but the economy continues to face ups and downs. Persistently high inflation, continual interest rate hikes by the Federal Reserve, and whispers about the possibility of a recession have soon-to-be retirees a little on edge. A 2023 Retirement Confidence Survey conducted by the Employee Benefit Research Institute found that just 27% of retirees "feel very confident they will have a comfortable retirement," Kiplinger reported. Those surveyed pointed to concerns about the rising cost of living making saving more difficult and the possibility of inflation outpacing their funds in retirement.

But at a certain point, you can only wait so long to enjoy your golden years. Besides, the market's next moves are nearly impossible to predict. The best course of action is to adjust your retirement strategies to ensure you can weather any market volatility. Here are some tips.

1. Know the ins and outs of your financial situation

You can't control what happens in the markets, as Vanguard noted, but you can control a number of aspects of your own financial situation. This all starts with getting familiar with where you stand financially. Specifically, you'll want to make sure you know things like your living and lifestyle expenses, your savings rate, and your investment costs.

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Once you know those details, you can better assess how to adjust when needed. For instance, if you know your costs of living, you can better "determine the rate of return necessary to meet your lifestyle needs so risk is minimized, and learn how to do it tax efficiently," Peter Casciotta, owner of Asset Management & Advisory Services of Lee County, explained to Bankrate. Similarly, getting familiar with the nitty gritty of your budget might allow you to more easily identify areas to cut back so your money doesn't have to stretch quite so far.

2. Diversify your investments

In a volatile market, diversification becomes especially important as a guard against risk while still allowing room for growth. Investors should "go beyond the traditional stock-bond mix and leverage alternatives," Tore Steen of CrowdStreet, Inc., told Kiplinger. "Investments like real estate that offer a longer time horizon can help mitigate the effects of volatility often seen in the markets," Steen said.

Another strategy is to add bond funds to your portfolio, which "can counterbalance market volatility," said Investopedia. But consider diversifying not just across asset classes, but also "within each asset category." You should aim for a "nice balance between large-cap and small-cap stocks and between growth and value funds. An exposure to international stocks "cushions the blow of a U.S. economic slump."

3. Maintain an asset allocation that aligns with your needs

Your portfolio's asset allocation — or its mix of different assets — can play a big role in how your portfolio performs. Matt Fleming, senior wealth adviser at Vanguard, told Kiplinger that "90% of an investor's return is determined by the stock, bond and cash allocation." Your portfolio's mix should align with "your current risk tolerance, and adjust if needed," per Vanguard.

You'll want to esure "the investment time frame matches your financial goals," Bankrate added. If you know you'll need money within a certain timeframe, consider "assets such as bonds and CDs," whereas if you have "an indefinite time, then it makes sense to add in investments such as stocks and stock funds that can offer you growth." Bankrate explained that "an income base can help protect against longevity risk, allowing you to invest in growth assets such as stocks so that the portfolio can keep up with inflation over a longer term."

4. Keep your emotions out of things

While it's understandable if you don't feel completely unruffled watching the market take a tumble, it's critical that your emotions don't knock your long-laid retirement plans off track. "You're better off staying the course when things are rough," according to Investopedia, than attempting to "cut your losses by selling share."

And on the flipside, avoid taking your foot off the gas when things are looking good, Investopedia added. It's "equally important to have a steady hand when the economy is humming along," because the market "will always have ups and downs." Individuals "who are ahead of expectations prior to a bear market will invariably have an easier time handling the fallout."

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5. Stay flexible

While you can technically start taking Social Security when you're 62, you could get a higher payout if you wait beyond that point. The "largest payout comes if you file for benefits at age 70," said Kiplinger. You might even think about delaying your retirement entirely if you're still happy at your job and are feeling good.

Similarly, you might be open to looking for ways to increase your income or cut your costs. You could consider taking a part-time job or renting out a room in your home. Or you could think about "downsizing to a smaller home or even relocating to a less expensive and tax-friendly state," said Kiplinger. Those extra funds could help you ride the ups and downs of the market while still enjoying your retirement.

Becca Stanek has worked as an editor and writer in the personal finance space since 2017. She has previously served as the managing editor for investing and savings content at LendingTree, an editor at SmartAsset and a staff writer for The Week. This article is in part based on information first published on The Week's sister site, Kiplinger.com.

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Becca Stanek

Becca Stanek has worked as an editor and writer in the personal finance space since 2017. She previously served as the managing editor for investing and savings content at LendingTree and an editor at SmartAsset. Prior to that, she was a staff writer at The Week. She's freelanced for publications including SoFi, Forbes, LendingTree, Finance of America Mortgage, and Policygenius while she earns her MFA in creative writing from Queens University in Charlotte. She currently lives in Valatie, New York.