Protecting Your Retirement From Market Losses
May 11, 2025
As you approach retirement, the way you think about investment risk often begins to change. During your working years, a market decline may be uncomfortable, but you typically have time to wait for a recovery. In retirement, you may also be withdrawing money from your portfolio, which can make significant losses more difficult to recover from.
The good news is that there are several ways to manage market risk. The right approach depends on your goals, income needs, time horizon, and how much access you need to your money.
Maintain a Cash Reserve
Keeping a portion of your retirement savings in cash or other highly liquid assets can provide money for near-term expenses without requiring you to sell investments during a market decline.
The tradeoff is that cash generally offers less long-term growth potential and may lose purchasing power to inflation.
Use High-Quality Bonds
Bonds can provide income and may reduce the overall volatility of a portfolio. A diversified mix of stocks and bonds is one of the most common approaches to managing retirement risk.
However, bonds aren't risk-free. Their values can fluctuate as interest rates and credit conditions change.
Reduce Portfolio Risk
Retirement doesn't necessarily mean abandoning the stock market. Instead, some investors gradually reduce their exposure to higher-risk assets as they approach retirement.
The goal is to find an appropriate balance between protecting your savings and maintaining enough growth potential to support a retirement that could last decades.
Consider Annuities for a Portion of Your Savings
Certain annuities can provide protection from direct stock-market losses and, depending on the product, may provide guaranteed income.
For example, a fixed indexed annuity credits interest based in part on the performance of a market index, subject to the terms of the contract. Your money isn't directly invested in that index, and the tradeoff for downside protection is typically limited upside through features such as caps, participation rates, or spreads.
Annuities also have important considerations—including surrender periods, liquidity restrictions, fees or charges depending on the product, and the financial strength of the issuing insurance company.
That's why an annuity shouldn't automatically be viewed as a replacement for an investment portfolio. It can be one tool within a broader retirement strategy.
There Is No Free Lunch
Nearly every form of financial protection involves a tradeoff.
More protection can mean giving up some liquidity or growth potential. More growth potential generally means accepting greater risk.
The goal isn't necessarily to eliminate risk. It's to determine which risks you're comfortable taking and which risks you would rather protect against.
Finding the Right Balance
A thoughtful retirement strategy may combine several approaches—cash for near-term expenses, investments for long-term growth, Social Security or pensions for income, and potentially an annuity for additional protection or guaranteed income.
At TrueView, we believe those decisions should begin with understanding your goals—not choosing a product.
Want to explore your retirement options? Schedule a conversation and we'll help you understand the strategies available and the tradeoffs involved.
Guarantees associated with annuities are subject to the claims-paying ability of the issuing insurance company. Fixed indexed annuities are insurance products and do not directly participate in the stock market or an underlying index.
