Market volatility is unavoidable, but its impact is not. The same downturn that's a minor setback for a 40-year-old can be devastating for someone who just retired and started drawing income. Understanding why — and what to do about it — is one of the most valuable things you can do for your retirement.
Why timing matters: sequence-of-returns risk
When you're withdrawing money, a big loss early in retirement forces you to sell more shares at low prices, leaving less to recover when markets rebound. Two retirees with the same average return can end up in very different places depending on the order in which those returns arrived. This is the risk income planning is designed to manage.
Practical ways to reduce the risk
- Keep a cash reserve so you're not forced to sell investments during a downturn.
- Cover essential expenses with guaranteed income (Social Security, pension, or annuity income) so market swings affect only discretionary spending.
- Protect a portion of principal with a fixed or fixed indexed annuity that won't lose value to a market decline.
- Diversify and rebalance so no single holding determines your outcome.
Protection without giving up everything
The goal isn't to abandon growth — it's to make sure a bad few years can't unravel decades of saving. Often that means protecting the portion of savings you'll rely on for essential income while keeping the rest invested for the long term.
Tim Hartle helps Tampa Bay retirees find that balance, comparing principal-protection options across more than 30 carriers. Annuities are not FDIC insured and guarantees are subject to the claims-paying ability of the issuing insurer.
Primary sources
- U.S. Securities and Exchange Commission — Annuities
- FINRA — Annuities
- Social Security Administration — Retirement benefits
Sources are provided for general verification. Rules and agency guidance can change.
This article is for general educational purposes only and is not financial, tax, or legal advice. Rules and product features vary by situation and by state. Please consult a qualified advisor about your own circumstances. Any annuity guarantees discussed here are subject to the financial strength and claims-paying ability of the issuing insurance company. Annuities are not FDIC insured and are not bank guaranteed.