Avoiding Market Risks in Retirement: Why It Matters
Market Volatility Can Derail Your Retirement—Here’s How to Stay on Track
You’ve spent decades saving and investing—but one market crash at the wrong time can undo years of progress.
When you’re close to or in retirement, market risk becomes income risk. That’s because your savings are no longer just growing—they’re being used to pay your bills. And that changes everything.
The good news? With the right strategies, you can still enjoy market-linked growth without putting your income—and your peace of mind—at risk.
What Is Market Risk in Retirement?
Market risk is the possibility that your investments will lose value due to economic downturns. In retirement, this risk is amplified because you’re not just investing for growth—you’re withdrawing for income.
This creates what’s called sequence-of-returns risk:
—If the market drops early in retirement and you’re taking withdrawals, you may lock in losses that are difficult—if not impossible—to recover from.
What the Numbers Say: 25-Year S&P 500 Performance
To provide some historical perspective, let’s review the approximate performance of the S&P 500 Index over the past 25 years.
From 2000 through 2024, the S&P 500 experienced significant market events, including the dot-com bubble, the 2008 financial crisis, and the COVID-19 pandemic. Despite these recoveries, the journey was anything but smooth.
Chart: S&P 500 Cumulative Growth of a Hypothetical $100,000 Investment (2000–2024)
Source: Annual S&P 500 returns compiled from Yahoo Finance historical data and Macrotrends.net. Figures are approximate and for illustrative purposes only. Chart does not reflect dividends, fees, taxes, or inflation.
Why “Set It and Forget It” Can Cost You Thousands
In your 30s and 40s, market dips are often followed by rebounds—and you have time to wait it out. But in retirement, especially the first 5–10 years, a significant loss can lead to:
- Reduced portfolio longevity
- Lower future income
- Forced reductions in lifestyle
- Increased stress and uncertainty
This is why retirement planning must shift from accumulation to preservation.
Comparing Risk Approaches in Retirement
| Strategy | Market Risk | Income Protection |
|---|---|---|
| Traditional 60/40 Portfolio | Moderate to high | No guaranteed income |
| Fixed Indexed Annuity (FIA) | No market downside | Guaranteed lifetime income |
| Immediate Annuity | None | Fixed monthly income for life |
| Target Date Fund | High during downturns | No income guarantee |
How to Reduce Market Risk in Retirement
Here are some proven strategies to protect your retirement income:
Use Fixed Indexed Annuities (FIAs)
FIAs offer:
- Protection from market losses
- Growth potential linked to a market index
- Guaranteed income for life, if structured properly
They’re not investments—but they are powerful retirement income tools.
Create a Floor of Guaranteed Income
Cover your basic expenses (housing, food, insurance, healthcare) with sources you can’t outlive—like Social Security, pensions, or annuities.
That way, even if markets dip, your lifestyle doesn’t have to.
Sequence Your Withdrawals
Use a bucket strategy to withdraw from cash and conservative assets during down markets—while giving growth assets time to recover.
A financial professional can help you coordinate this across taxable, tax-deferred, and tax-free accounts.
Rebalance Regularly
Markets shift. Your plan should too.
Rebalancing helps you maintain your target risk level and can also create opportunities to lock in gains.
Final Thought: You Don’t Have to Choose Between Safety and Growth
Too many retirees believe they have to choose:
“I can be safe… or I can grow my money.”
But that’s a false choice.
With tools like FIAs, you can:
- Protect your principal
- Access growth linked to a market index
- Create a personal pension with guaranteed income
- Eliminate the stress of market timing in retirement
Tip of the Month: You can still take advantage of favorable annuity rates in 2025 and lock in income now or in the future.
Ready to Build a Safer Income Strategy?
Visit SafeMoney.com to explore annuity-based solutions and protect your retirement income from the next downturn.
👉 To learn more about protecting your retirement income from market risk, be sure to watch our Safe Money First presentation, available now at SafeMoneyfirst.com.
What Is SafeMoneyFirst.com?
SafeMoneyFirst.com is our exclusive educational platform designed to help retirees and pre-retirees understand how to protect their savings and create reliable retirement income. The core of the site is the Safe Money First presentation—a clear, no-pressure video that explains how to:
- Eliminate market losses from your retirement plan
- Turn your savings into a guaranteed income stream
- Avoid the most common retirement pitfalls
- Make confident, informed financial decisions—without high-risk strategies
It’s ideal for anyone who wants to put safety, income, and peace of mind first in retirement planning.
🧑💼 Written by Brent Meyer, founder of SafeMoney.com. With more than 20 years of hands-on experience in annuities and retirement planning, Brent is committed to helping Americans make informed, confident financial decisions.
Disclaimer: This article offers general retirement planning tips and is not personal financial advice. Consult a licensed professional before making any decisions.
