If you’re planning to retire within the next few years — or you’ve recently retired — market volatility may feel especially unsettling. After years of saving and planning, you’re now entering a stage where your portfolio may shift from growth to providing income. The five-year window before and after your retirement date is especially critical — when market downturns can have an outsized impact on your longterm financial security.
While you can’t control the markets, there are meaningful steps you can take to “stress-test” your retirement income, so it is not consumed entirely by market drops before you stop working.
Explore your shortand medium-term income needs. One of the most important steps to take is to understand how much of your portfolio you’ll need to rely on for income. It depends on your other income sources such as Social Security, IRAs, 401ks, pensions and wages if you work in retirement. You’ll want to avoid taking too much from your portfolio in response to a decline because that could increase the likelihood that your money may not last through retirement. A financial advisor can help you determine your threshold for monthly withdrawals, based on your income needs, long-term outlook, inflation and risk tolerance.
