Iran War Volatility Puts Near-Retirees at Risk: Why ‘Staying the Course’ Fails Now
Written by
Gabrielle Olya
Edited by
Molly Sullivan
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Investors are often advised to “stay the course” once they have a plan in place — but that may no longer be good advice for those on the cusp of retirement. The ongoing conflict in Iran has been causing major market swings, and for investors nearing retirement, those swings can permanently change how long a portfolio lasts.
Here’s what you need to know if you’re planning to retire soon.
Why ‘Staying the Course’ Can Hurt Near-Retirees in Volatile Markets
Your investing strategy should depend on your retirement timeline, so the advice that works for those decades away from retirement might not be applicable if you’re just a few years away.
“Staying the course is great advice if you are mid-career with decades of working ahead of you, but if retirement is five to 10 years away, your strategy may change,” said Jamie Hopkins, CFP, CEO of Bryn Mawr Trust Advisors. “However, it’s important not to make emotional decisions.”
The key issue for near-retirees is timing.
“If markets drop sharply right before or right after you retire and you are pulling money out of your portfolio to cover living expenses, you do not have the time to wait for a recovery the way a younger investor does,” Hopkins said.
“If recent volatility has you losing sleep, pay attention to that feeling,” he continued. “It may be telling you that you are carrying more equity risk than is appropriate for someone on the doorstep of retirement.”
Still, reacting too aggressively can do more harm than good.
“Making emotional decisions that pull you out of the market at exactly the wrong time is still one of the biggest wealth destroyers in any market downturn,” Hopkins said, “but staying the course should not become an excuse to avoid asking whether your current allocation still makes sense for where you actually are in life.”
How Near-Retirees Can Protect Their Portfolios From Market Volatility
For investors within a decade of retirement, today’s volatility may warrant careful adjustments — but not hasty moves.
“Geopolitical events create real short-term volatility, but they rarely change the long-term trajectory of U.S. markets,” Hopkins said. “Data going back to WWI shows markets are resilient — up a median of about 5% six months after major geopolitical shocks. The bigger risk for most investors is making an emotional decision that gets them out of the market at the wrong time.”
That said, near-retirees are in a different position than someone with 20 or 30 years ahead of them, and this environment calls for honest reflection and deliberate action.
“Start by stress-testing your income plan,” Hopkins said. “Make sure your essential expenses — things like housing, healthcare and utilities — can be covered by reliable income sources such as Social Security, pensions, dividends or fixed income, rather than depending entirely on portfolio withdrawals. You do not want to be forced to sell equities at a loss just to cover monthly bills.”
If market volatility is making you uneasy, consider shifting some exposure toward fixed income.
“The goal here is not to abandon your plan or overreact to headlines,” Hopkins said, “but to make sure your allocation, your income sources and your reserves are built for the retirement you’re about to live, not the one you planned for decades ago.”
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