3 Smart Retirement Moves To Protect Your Savings in a Volatile Market
Written by
Sarah Li Cain
Edited by
Cory Dudak
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Those saving for retirement are navigating a market shaped by sticky inflation, uncertainty over interest rates and the whims of the stock market.
At the end of October, the Federal Reserve lowered its benchmarked rate to 3.75% to 4%. However, officials warned any future moves will depend on income data, and that “uncertainty about the economic outlook remains elevated.”
Meanwhile, inflation has cooled a bit, but still sits higher than the Fed’s goal. There’s also the matter of major analysis saying U.S. equities are showing strong gains and resilience after multi-year rallies. This means stocks may be exposed to vulnerabilities and fall in value. For example, new and proposed tariffs could pressure supply chains, leading to uncertainty around earnings.
With this shaky market landscape, many retirees are turning to three simple moves to protect their income and risk against their portfolio.
1. Create a Three to Five Year Income Buffer Bucket
If you’re getting closer to retirement (or are about to retire), most experts recommend having at least three to five years of essential spending in a more “stable” account like CDs, savings accounts or similar accounts to ensure you have the funds and that they’re not privy to the whims of the market.
You might not need to touch this account, but it’s there to pull from without having to touch your investments during downturns. If you do pull from it, you can add to the bucket again when markets are strong and you withdraw from your retirement accounts.
2. Adjust Calculations for Guaranteed Income Sources
Most folks will get some sort of Social Security payment in retirement. For others, there may also be pensions. Having these predictable income sources could help ease the pressure you may feel for saving more for retirement. The farther you are from retirement, the more the numbers for your stable income sources will change, so you’ll want to regularly review them.
For example, say you get $15,000 in stable income and you’ve determined you’ll spend around $45,000 per year on essentials during retirement. In this case, you’ll need to aim to set aside $30,000 annually.
3. Build a Short-Term Treasury Bills Ladder
Also known as T-Bills, treasury bills tend to offer low risk with fairly predictable returns. Even after the recent Fed cuts, the rates are still attractive. You’re less exposed to interest rate risk, and the principal is backed by the full faith of the government.
Building a T-bill ladder means you purchase them at different maturities so you can access your cash at different times. That way, you get the benefit of having your money work for you with the ability to access the cash every few months or years (depending on maturity dates).
You can even consider using the same tactic with certificates of deposit (CDs) if you find that interest rates are better, or you prefer to go through the bank to help generate predictable returns for your cash.
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