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After experiencing significant fluctuations in the stock market, a growing number of Americans are expressing anxiety regarding the future of the U.S. economy as well as their personal financial situations. This uncertainty is particularly pronounced among those approaching retirement age who are setting plans to exit their professional lives and rely on their investment portfolios for living expenses.
Experts highlight that the initial five years of retirement are critical, often referred to as the “danger zone” for retirees beginning to withdraw from their accounts during market downturns. Amy Arnott, a portfolio strategist with Morningstar Research Services, explains that drawing down assets in a declining market can lead to diminished portfolio value, making it more challenging to benefit from a market recovery later.
In 2025, an estimated 4.18 million Americans are expected to turn 65, marking this year as one of the highest for retirement age milestones compared to previous years, as reported by the Alliance for Lifetime Income.
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Safeguarding Your Retirement Funds
In light of recent stock market advancements, experts advise individuals to prioritize “protecting their nest egg” through prudent rebalancing based on personal risk tolerance and financial timelines. Jon Ulin, managing principal of Ulin & Co. Wealth Management, suggests that those in their early 60s consider adjusting their investment strategy towards a 60/40 portfolio, which typically consists of 60% stocks and 40% bonds.
However, diversification may play a critical role depending on individual risk appetite and retirement goals, according to financial professionals. In times of market volatility, those feeling uneasy about their investments might opt for a more conservative allocation strategy.
“This moment presents an excellent opportunity for a portfolio assessment,” Ulin remarked, emphasizing the importance of aligning investments with one’s risk profile.
Establishing Cash Reserves
Experts generally recommend against liquidating investments during market downturns, particularly during the early years of retirement—a period often associated with “sequence of returns risk.” This risk can detract from long-term portfolio growth by depleting funds when market conditions are unfavorable.
CFP Malcolm Ethridge, founder of Capital Area Planning Group in Washington, D.C., encourages retirees to maintain the equivalent of two years’ worth of income in cash savings as they near retirement. This approach helps mitigate potential early losses, allowing retirees to use cash reserves for essential expenses while giving their investments time to recover.
Additionally, having liquid assets can ease psychological burdens, providing a sense of security that can influence how retirees manage their portfolio withdrawals, Ethridge points out.
Exploring ‘Bond Ladders’
In response to recent instability in the bond market, older investors might contemplate establishing a bond ladder as a means to generate income from their portfolios, suggests Alex Caswell, a certified financial planner at Wealth Script Advisors in San Francisco. This strategy entails purchasing multiple shorter-term Treasuries with staggered maturities, which can help deliver a consistent income stream while concurrently managing interest rate risks.
For instance, an investor could choose Treasuries that mature at intervals of six months to one year over a span of up to five years. Some may also implement this strategy using certificates of deposit (CDs).
The bonds or CDs that reach maturity provide clients with both financial stability and emotional assurance, particularly for those venturing into retirement.
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