The volatility in the stock market makes now a scary time for many retirees and pre-retirees who are worried about their nest eggs. According to CNN: “President Donald Trump’s first 100 days have coincided with the stock market’s third-worst start to any presidency in U.S. history, only behind Richard Nixon and Gerald Ford.”

The market see-saw has been particularly worrisome to people who on fixed income and drawing from or preparing to draw from their retirement savings accounts. Stocks have recovered, but analysts warn we should be prepared for a bumpy ride.

Not time to Panic

However, it’s not time to panic. “Everyone should remember that market declines are normal, even though they happen for different reasons every time,” says David Schneider, Certified Financial Planner with Schneider Wealth Strategies in New York. “Market jitters are a recurrent theme in history, even if the reasons for these bumps in the road may change.”

“So, investors shouldn’t mistake a dip for the end of the world,” he says. “We made it through the global financial crisis. We made it through COVID. Over 20 years ago, we made it through the dot.com bust, and the odds are we will make it through this. So, it’s worth it to remember that market declines are a normal part of the economic cycle, even if the specific triggers vary.”

“I also would say it’s generally advisable for retirees to avoid making investment decisions based on headlines, developing and adhering to a personalized plan that aligns with their goals and risk tolerance is a more prudent approach.”

It’s time to plan

It’s a good time to plan. Schneider says the key now is to protect the gains in your portfolio that you’ve already seen.

Three to five years of expenses should be kept in cash or short-term fixed income instruments. “Today it is possible to get a 4% return on cash, so it’s not like they’re leaving a ton of cash on the table, but if the markets go down you won’t need to sell at fire-sale prices to meet living expenses. The stock market is a long-term investment, so short-term money just doesn’t belong there.”

Russell Hackman, president of Hackmann Wealth Partners and author of the book, “Wall Street Is Not Your Friend,” says most people are still sitting on major gains in their portfolios.

“The key is to protect gains,” he says. “Don’t risk them all if huge downturn comes in the next few years. Diversify. Make right change. You can still do that with confidence that you are still way up over 5 years. Market was up more than 20% last year, more than 20% the year before.”

What you should do is use this downturn to plan and refine your investment strategy.

“My long-term advice is to make sure you have what we call the big six retirement risks covered,” says Hackmann: too much market risk; outliving your money; planning for long-term income; planning for inflation; managing taxes; paying too much in fees; and long-term care.

“Develop a plan that contemplates how you will manage these risks,” he says.

“There’s always a new reason why market takes a big hit,” says Hackmann. “If you are in long term, you should take it as a given that it will happen. You need the right diversification to be able to ride these plans and not panic. You need a good advisor to help you out with.”

Diversify

“This is an opportunity here for people to consider broader diversification,” says Schneider. “So, if somebody doesn’t have a well-diversified portfolio, they need to remember that the next 10 years is unlikely to be the last 10. International stocks, for example, are cheaper than their U.S. counterparts. They offer higher dividend yields, and they are priced to potentially beat domestic equities over the next 10 years. And I do think that the global realignment that we’re seeing might be a catalyst for that.

“Also, both U.S. stocks and bonds are likely priced to produce mid-single digit returns over the next decade, according to a lot of experts,” he says. “So, investors may not be leaving so much on the table by holding more fixed income securities.”

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Rodney A. Brooks is an award-winning journalist and author. The former Deputy Managing Editor/Money at USA TODAY, his retirement columns appear in U.S. News & World Report and Senior Planet.com. He has also written for National Geographic, The Washington Post and USA TODAY and has testified before the U.S. Senate Special Committee on Aging. His book, “The Rise & Fall of the Freedman’s Bank, And Its Lasting Socio-economic Impact on Black America” was released in 2024. He is also author of the book “Fixing the Racial Wealth Gap.” His website is www.rodneyabrooks.com

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