What to Do When the Market Drops and You’re Retired (Or Close to It)
Quick Answer
Market volatility becomes more significant near retirement because investors typically have less time to recover from major losses while also beginning to rely on portfolio income.
The Emotional Shift
Market downturns are unsettling for almost everyone. But for people who are retired, or close to it, they can feel different. When you're no longer adding to your accounts but drawing from them, a down market raises a specific and legitimate concern: am I going to have to sell investments at a loss just to pay my bills?
If the answer to that question is yes, that's a planning problem, not a market problem.
Retirement Changes the Equation
Once retirement withdrawals begin, large losses can become much harder to recover from. This creates emotional pressure that may lead investors to make reactive decisions.
At Branning Wealth Management, we build retirement income strategies that assume the market will go down. That's not pessimism. It's planning. By building a bond ladder that pre-funds several years of living expenses, we make sure our clients are never forced to sell long-term investments at the wrong time just to cover short-term needs.
This is the foundation of what we call a Safety-First approach to retirement income. The near-term income is protected. The long-term investments have room to recover. And the client isn't making emotional decisions during a volatile market because the plan was built for exactly this scenario.
It Comes Down to Time Horizon
A helpful way to think about this: every dollar in a portfolio has a job, and that job depends on when you'll need it. Money you'll spend in the next year or two shouldn't carry the same risk as money that won't be touched for a decade or more. When the two get mismatched, short-term needs sitting in long-term investments or vice versa, that's usually when a market drop turns into a real problem instead of just a headline.
That's the thinking behind structuring retirement income in layers: near-term spending covered by cash and short-term reserves, a few years of expenses bridged by a bond ladder, and the portion of the portfolio you won't need for many years left invested for long-term growth. Each layer is doing a different job on a different timeline, which is what allows the growth-oriented money to stay invested through a downturn instead of being sold at the worst possible time.
Why Planning Matters
When the market drops, the right response for most retirees with a well-structured income plan is: nothing. Stay the course. Let the strategy do what it was designed to do.
It's Also Worth Remembering What "Safe" Really Means
It's tempting to think of cash as the safest place to wait out a downturn. In the short term, it is. A dollar today is still a dollar tomorrow. But for money that sits untouched for years, cash carries its own risk: inflation quietly reduces what that money can buy. For retirees, that's part of why a plan needs both protection from short-term market drops and protection from long-term purchasing-power erosion. Neither cash nor stocks solves both problems alone, which is why the layered approach matters.
A retirement strategy should account for:
- market downturns
- inflation
- healthcare expenses
- longevity
- income needs
Final Thought
Preparation, not prediction, is what makes a down market manageable.
If a rough stretch has you wondering whether your retirement income actually holds up, that's worth examining before the next one. Jason covers this in Ten Minutes Wealthier: Essentials — the episode on being built for the best case while protected for the worst runs about ten minutes.
And if you'd like to look at how your own income is structured, visit branwealth.com to learn more about how we work.
Disclosures:
All investing involves risk, including the potential loss of principal invested. This blog is distributed for general informational purposes only and is not intended to constitute legal, tax, accounting, or investment advice. Information in this blog is obtained from sources that we believe reliable, but BWM does not warrant or guarantee the timeliness, accuracy, or completeness of this information. Investment advisory services are offered through Asset Dedication, LLC, an SEC-registered investment advisory firm DBA Branning Wealth Management. Jason Branning, Kelly Jennings, Johnson Rhett, and Kristi Tidwell are investment advisor representatives of Asset Dedication.