In this guide, we walk through what to do before and after retirement to help get the most of your retirement savings, especially in a down market.
Planning for retirement during a volatile market can be overwhelming—and stressful. Working with a financial professional can ease the burden, but having a solid understanding of your own plan can empower you to have the retirement you want.
In this article, we share eight ways to help you make smart retirement moves in a turbulent economic landscape.
As you near retirement, there are a few proactive steps you can take to get your financial life on solid ground.
Market volatility is a good reminder that asset allocation matters. Too much invested in stocks, and your portfolio can be vulnerable to large losses during a downturn. Too much sitting in cash and you’ll be leaving long-term gains on the table.
Portfolio allocation is about balancing your needs in retirement. Take some time to think through the following concepts:
As you near or enter retirement, it’s likely time to start reducing your stock-to-bond allocation. According to Nick Holeman, CFP®, Director of Financial Planning at Betterment, investors may want to consider lowering their ratio to about 56% stocks in early retirement..
Everyone’s situation is unique, making it wise to talk with a CERTIFIED FINANCIAL PLANNER® to find the right portfolio allocation for you as you near retirement.
AARP reported that around 30% of Gen Xers (ages 44-59) and 16% of boomers (ages 60-78) have no emergency savings. If you’re in this age range, an emergency fund can be even more important than when you were younger, because you no longer have income from a paycheck.
As you think about your emergency fund, here are some tips as you near retirement:
Next steps: See the three steps to creating your emergency fund.
Deciding when to start receiving Social Security is one of the most important retirement choices, as it impacts your monthly budget for years to come.
For your budget, start by figuring out what your retirement lifestyle will realistically look like and what it will cost. It helps to draw up a budget that separates “must-have” expenses (needs) from “nice-to-have” expenses (wants).
Once you have an idea of your expenses, working with a financial advisor can help you plan ahead to understand your sources of income, including:
You can claim Social Security as early as age 62, but your monthly benefit will be permanently reduced. If you wait until full retirement age (~66–67) or even up to age 70, your benefit will be significantly larger.
Finally, before you step into retirement, it’s wise to give your investing plan a “stress test” to see how it may perform.
A simple exercise is to simulate a market downturn right before or after you retire.
Playing out different scenarios of market declines can help you determine how “safe” your retirement portfolio is from volatility, especially if you are relying on it for a certain level of income.
Make scenario planning easier. The Betterment app does the math for you, letting you test potential outcomes of different financial situations. And if you need more hands-on advice, our CFPs® can be your guide.
If you're concerned about meeting your long-term financial needs, delaying retirement by even 6–12 months can make a meaningful difference—especially in a down market.
Extra time working means:
When possible, we are trying to avoid what’s called “sequence-of-returns risk”—the danger of experiencing poor market returns early in retirement, which can drastically affect your nest egg’s longevity. By delaying retirement in a downturn, you reduce this risk.
You’ve made it: Retirement. Congrats! Now, here are three tips to help you get the most out of your savings.
When stocks are tumbling, it’s natural to feel worried. But one of the worst things a recent retiree can do is panic-sell. All it will do is lock in your losses and rob you of any chance for your portfolio to rebound.
Research shows that “doing nothing” is generally your best bet during a volatile market. Dating back to 1988, if you decided to invest on any given trading day, 65% of those days would have resulted in a positive investment return over the following month. The share of days with positive returns goes up as that trailing holding period extends. Historically, no matter when an investment was made between 1988 and 2009, the market was higher 100% of the time just 15.
You likely have decades ahead of you in retirement. If you planned ahead and have a well-diversified investing portfolio, your best bet is to stay the course.
Tax planning doesn’t stop when paychecks stop—in fact, it can become even more important in retirement.
One key tip to plan for is to withdraw from your account in a tax-efficient order.
Generally, tax-efficient withdrawals follow this order:
Why? Using taxable investment accounts first allows your tax-advantaged accounts to keep growing sheltered from taxes. Moreover, when you sell assets from a taxable brokerage account, any long-term capital gains are taxed at a lower tax rate (0%, 15%, or 20%) as opposed to IRA withdrawals, which are taxed as ordinary income.
Also, things like stock dividends and bond interest in taxable brokerage accounts are being taxed annually anyway. If you spend that cash instead of reinvesting it, you’re not incurring additional tax—you’re simply using what would be taxed regardless.
That said, you may experience years of lower taxable income, during which it could make sense to prioritize withdrawals from tax-deferred accounts or consider Roth conversions to fill up lower tax brackets.. When the market is down, converting during a dip means you pay taxes on a smaller balance, and any rebound growth afterward happens tax-free in the Roth account.
To understand how a Roth conversion may impact your personal financial situation, we strongly recommend consulting a tax advisor and IRS Publication 590.
Required minimum distributions (RMDs) are the minimum amounts you must withdraw from your retirement accounts each year.
According to the IRS, you generally must start taking withdrawals from your traditional IRA, SEP IRA, SIMPLE IRA, and retirement plan accounts when you reach age 73. (For more info, see the IRS’s Official RMD FAQs.)
So, why are RMDs important to plan for?
Simply put: RMDs can raise your taxable income.
A sudden spike in income from mandatory RMDs can increase your taxable income, bumping you into a new tax bracket.
Without careful planning, a higher tax bracket can potentially result in:
Thoughtful tax planning—such as managing withdrawals early, considering Roth conversions, and coordinating Social Security timing—helps spread out taxable income more evenly over retirement and preserves more of your wealth.
Plan for a brighter retirement—with an expert
At Betterment, we’re here to help you build the future you want. We provide resources and experts to help every step of the way.