Retirees Can Protect Nest Eggs During Stock Market Downturns, Expert Says

Retirees can safeguard their retirement savings during stock market declines by strategically adjusting their withdrawal sources and amounts, according to Christine Benz, director of personal finance and retirement planning at Morningstar. Benz advises that retirees consider modifying where they draw funds from and reduce the overall dollar value taken out of their investment accounts.

Fixed annuities can provide retirees with a guaranteed income stream that offers more stability and predictability compared to the volatility of stock market investments. While not a perfect solution on their own, fixed annuities can be an attractive element of a diversified retirement income plan in conjunction with other investment vehicles. A financial advisor can assist retirees in developing an individualized approach that may incorporate fixed annuities as a key component to strike the right balance between risk and financial security in retirement.

Why this matters: With many retirees relying on investment portfolios to fund their retirement, stock market downturns can pose a significant risk to their financial security. Implementing strategies to mitigate the impact of market volatility is critical for retirees to ensure their nest eggs last throughout their retirement years.

Research from the UBS Chief Investment Office supports Benz's recommendations, emphasizing the importance of adjusting withdrawal sources and amounts during market declines. Benz suggests retirees take specific steps such as: 1) Defining clear goals for their financial plan with appropriate inflation rates for each objective; 2) Viewing retirement in distinct phases to better project future expenses; and 3) Factoring in guaranteed income from Social Security, pensions, and annuities to reduce the strain on investment portfolios and hedge against longevity risk. By employing these approaches, retirees can improve their financial resilience and preparedness for retirement in the face of economic uncertainties.

Benz highlights the value of guaranteed income sources like Social Security, pensions, and annuities in providing a reliable financial foundation for retirees, especially during stock market downturns. "Consider the role of guaranteed income from sources like Social Security, pensions, and annuities to alleviate the burden on your portfolio and help protect against outliving your wealth," Benz advises. Incorporating these strategies can enable retirees to better navigate the challenges of funding their retirement goals amid fluctuating economic conditions.

Key Takeaways

• Retirees can safeguard savings by adjusting withdrawal sources and amounts.
• Fixed annuities provide stable income and can be part of a diversified plan.
• Strategies to mitigate market volatility are crucial for retirement security.
• Guaranteed income from Social Security, pensions, and annuities can reduce portfolio strain.
• Incorporating these strategies can help retirees navigate economic uncertainties.