4 Investing Rules Wealthy Retirees Need To Handle 2026 Volatility
Written by
John Csiszar
Edited by
Jenna Klaverweiden
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The impact of volatility on wealthy retirees can be outsized simply due to the fact that they have the largest account balances.
Missteps handling volatility at this level can result in significant retirement shortfalls, making it extra important to avoid common mistakes. Here are four rules that wealthy retirees should follow amid market volatility.
Don’t Tap Accounts Too Early
Wealthy individuals often retire early, and this can lead to some big financial planning mistakes. If you’re younger than 59 1/2, for example, tapping your pretax retirement accounts, like traditional IRAs and 401(k) plans, not only results in taxation but also a 10% early withdrawal penalty, per the IRS.
But that might not even be the biggest problem. Tapping retirement accounts early can materially shrink retirement savings, as it stops money from compounding.
If you earn a 10% average annual return, for example, your money will roughly double every seven years. If you withdraw $200,000 in retirement funds at age 59, for example, you’ll be missing out on another potential $200,000 in retirement savings by the time you reach age 66.
This is particularly true if you withdraw money during volatile periods when your account value is down.
Don’t Allocate 100% of Assets to Stocks
It’s true that retirees need a growth component in their accounts, as that money may be needed for 30 years or more. But keeping 100% of your money in stocks right as you retire can subject you to extreme “sequence of returns” risk.
Imagine the same scenario where you plan on earning a 10% average annual return in retirement, doubling your money roughly every seven years. But then in your first year of retirement, the markets drop by 20%. While you may indeed earn a 10% average return over 30 years, you’ll immediately be starting from a base that’s 20% smaller.
This type of volatility can greatly alter your long-term financial planning, and it’s entirely possible if your account is 100% in equities.
Avoid Buying a ‘One-Size-Fits-All’ Investment
There’s no such thing as an “average” investor. Each individual has their own investment objectives, time horizon, risk tolerance and financial needs. If you follow a generic asset allocation that’s simply based on your age, you won’t have an efficient portfolio that matches your specific financial situation.
These types of generic portfolios may not even provide the diversification benefits that you think you’re getting. Affluent investors in particular should gravitate toward customized strategies that better reflect their specific financial needs.
Coordinate Withdrawals Across Accounts
Wealthier retirees typically hold a variety of accounts, both taxable and tax-advantaged. Choosing which account to withdraw from can have a big impact on your tax situation.
When account values fall, for example, it may reduce future tax liabilities if you take a withdrawal from your tax-advantaged accounts. Working with a tax advisor is imperative.
Editor’s note: This article is for informational purposes only and does not constitute financial advice. Investing involves risk, including the possible loss of principal. Always consider your individual circumstances and consult with a qualified financial advisor before making investment decisions.
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