With unpredictable markets and economic uncertainty, it's important to take steps to safeguard your retirement savings. Market volatility can lead to significant losses if you’re not properly prepared, but there are many effective strategies for protecting your hard-earned nest egg.
According to the financial professionals of Kiplinger Advisor Collective, you can help shield your retirement funds from the impact of market fluctuations with a few strategic moves. If you’re looking to secure your future, consider these expert-recommended tips for managing retirement savings during turbulent times.
Have a personalized drawdown plan
“You need to have a personalized and vetted drawdown plan in place that takes market volatility into consideration. A portion of your retirement nest egg needs to be in an investment vehicle like a fixed index annuity that can provide a guaranteed paycheck. The core needs and monthly budget need to come from this income stream to help with peace of mind that your bills are covered in retirement.” — Shawn Maloney, Retire Wise, LLC
Allocate funds to other asset classes
“Volatility is part of the investment markets. During your wealth-building years, it is easy to invest passively and let the markets work. As you approach retirement, allocating to other asset classes becomes more important. Having a mix of stocks, bonds, gold and cash can reduce volatility and provide peace of mind. Sleeping well at night is sometimes just as important as making money!” — Elizabeth Graham, Riggs Asset Management Co., Inc.
Consider whether you're reacting to recent market events
“The first question always has to be, ‘Do I actually need to protect my savings from market volatility, or am I reacting emotionally to recent events?’ After all, volatility is the ‘price’ investors pay for what the market can offer. Electing to hedge volatility without tying your portfolio to an upcoming cash need is effectively market timing — which is a seductive idea, but broadly unadvisable.” — Adam Harding, Harding Wealth, Inc.
Diversify your portfolio
“Diversify, diversify, diversify. You want to spread your investments across different asset classes, sectors and even investment products. This can include incorporating products that have downside protection or even principal protection but still allow for participation in market returns. You also want to regularly review and adjust your portfolio as needed.” — Bob Chitrathorn, Wealth Planning By Bob Chitrathorn of Simplified Wealth Management
Move a portion of your savings to an account with a guaranteed interest rate
“Consider moving a portion of your retirement savings into an IRA CD, multi-year guaranteed annuity or fixed index annuity. These options provide a guaranteed interest rate and protection from stock market volatility. If the term is short, you can later move the funds back into a more aggressive retirement savings plan or investment.” — Shawn Plummer, The Annuity Expert
Understand where your money is and why
“Investing implies expecting positive returns while knowing there could be losses. Savings incur inflation risk. So-called ‘guaranteed investments’ are complex and have risks the investor may not understand. Investing in any market includes a volatility risk. Understanding where your money is and why, financial literacy and appreciating the time value of money are the only protections I know.” — Deborah W. Ellis, Ellis Wealth Planning
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Plan for different scenarios
“First, figure out how much income you need to have your minimum comfortable lifestyle over the next few years. Calculate net present value (NPV) to figure out the lump sum you'll need. Then, put your money in a portfolio that offers income, aside from a pension (if you have one). Figure out (or consult with financial experts on) what would happen to your retirement savings if certain scenarios occurred, and how to hedge for those.” — Zain Jaffer, Zain Ventures
Allocate funds to tangible assets
“One step to protect retirement savings from market volatility is to allocate a portion to tangible assets like real estate or commodities. These assets often hold or increase in value during market downturns, which provides a buffer against stock market fluctuations. By balancing your portfolio with hard assets, you create a protective layer to preserve wealth and offer stability in uncertain economic times.” — Jabin Geevarghese George, Tata Consultancy Services Ltd.
Invest in collectibles
“Collectibles such as art, rare coins, vintage cars, precious metals like gold and silver, and limited-edition memorabilia can serve as a hedge against market volatility. These assets often have value that's not directly correlated with stock market performance, providing diversification for a retirement portfolio.” — Manoj Kumar Vandanapu
Explore alternative investments
“I find that using self-directed retirement accounts and investing them into alternative investments often yield the best outcome, since this avoids market volatility. Additionally, hedge funds are another option that offers several alternative investments that are uncorrelated with the stock market.” — Justin Donald, Lifestyle Investor
Reevaluate your goals and look at fixed investment options
“Risk and return are a balancing act. There is no such thing as a liquid, low-risk, high-growth investment. Choose two, at most. For investors who now shrink from risk and find themselves shocked at the recent market movement, take time to reevaluate your goals. Explore fixed investment options as a sleeve of your portfolio. These have their own trade-offs but may help you sleep at night.” — Stephen Kates, Annuity.org
Work with a financial adviser to educate you
“As you get closer to retirement, you need to have a plan to deal with market volatility and sequence of returns risk once you start withdrawing funds from your accounts. There are several strategies that can help limit market volatility, such as structured notes, various types of annuities (e.g., buffer or registered index-linked annuities, fixed index, fixed), buffered ETFs and others. Work with an adviser to get educated on these strategies.” — Ronald Gestiehr, Lifetime Financial Growth
