Market Volatility in Retirement: How to Build a Plan That Stays Steady

If the last few years have taught us anything, it is that markets can swing dramatically and without warning. For high-income earners approaching or already in retirement, these abrupt  changes can feel especially nerve-wracking. After decades of building wealth, the last thing anyone wants is to watch a lifetime of savings shrink just as they begin to rely on it.

So how do you protect your financial future without sacrificing growth? It starts with a strategy that is intentionally designed to stay steady through uncertainty. At NPPSS, we believe a strong retirement plan should not depend on ideal market conditions. It should be resilient, flexible, and focused on preserving your financial independence through every stage of life.

Let’s explore how market volatility impacts retirement and the key principles behind building a plan that offers stability no matter what the market is doing.

Why Volatility Poses a Greater Risk in Retirement

During your working years, market dips are less concerning. You are contributing to your portfolio regularly, and you have time on your side to recover from downturns. But retirement flips that model. You are no longer accumulating wealth. Instead, you are withdrawing from it to fund your lifestyle. That shift introduces a new set of risks that can quietly but significantly impact your long-term security.

One of the most serious risks is known as the sequence of returns risk. This refers to the order in which investment returns occur. If you experience market losses early in retirement while also taking withdrawals, the combination can permanently reduce the value of your portfolio. Even if the market eventually recovers, your savings may not.

Retirees also face a shorter time horizon. There is less room for error and limited time to bounce back from a market correction. This reality can lead to emotionally driven decisions, such as panic selling or pulling back too aggressively on risk, which in turn reduces growth potential.

The Solution: A Plan Built for Volatility

You cannot control the market, but you can control how your retirement strategy responds to it. The goal is not to avoid all risk, but to structure your income in a way that is less exposed to market disruptions. A steady plan balances protection with growth and provides flexibility in how and when you access your funds.

Here are several key ways to build a retirement strategy that holds firm when the market does not.

Diversify Your Income Streams

Relying on a single investment account or one type of income is risky in any environment, but especially in retirement. A smart strategy spreads your income across multiple sources with different risk profiles and tax treatments. We recommend thinking in terms of income buckets—short-term, mid-term, and long-term.

Short-term income should come from low-risk, liquid assets that are not tied to the market. This could include a cash reserve, short-term bonds, or guaranteed income products.

Mid-term income can come from sources like dividend-paying stocks, municipal bonds, or a portion of your retirement accounts that are positioned conservatively.

Long-term income should be focused on growth and inflation protection. This may include indexed accounts, equities, or alternative investments that are designed to support you in the later years of retirement.

We help clients organize their retirement income across a blend of vehicles, including 401(k)s, IRAs, annuities, life insurance products, and brokerage accounts. Each part plays a role in lessening the impacts of volatility and providing dependable income.

Use Market-Protected Tools

Volatility is a fact of investing, but it does not have to disrupt your retirement income. There are several non-market-based tools that can offer protection, growth potential, and tax efficiency.

One option is an Indexed Universal Life (IUL) insurance policy. IULs tie the growth of your cash value to a stock market index, such as the S&P 500, but with downside protection. If the market declines, your account will not lose value due to a built-in floor. If the market rises, you can benefit from gains up to a cap. Over time, this structure allows for steady accumulation with far less exposure to loss.

Fixed indexed annuities can also be used to generate guaranteed lifetime income, regardless of what the market does. These tools are particularly useful in creating stability for essential expenses like housing, healthcare, and daily living.

By combining traditional investment accounts with market-protected strategies, you can enjoy the benefits of both growth and security.

Implement a Thoughtful Withdrawal Plan

How and when you withdraw money in retirement is just as important as where that money comes from. A one-size-fits-all approach often leads to unnecessary taxes, penalties, or erosion of principle.

We help our clients design withdrawal plans that align with their personal tax situation, market conditions, and lifestyle needs. This includes drawing from conservative or guaranteed sources during market downturns, while allowing risk-based assets time to recover. It also means identifying which accounts to tap first based on your tax bracket, Required Minimum Distributions (RMDs), and estate planning goals.

A well-coordinated withdrawal strategy can extend the life of your portfolio and help minimize the impact of volatility over time.

Account for Inflation and Rising Costs

While market volatility tends to get more attention, inflation is another silent threat to retirement income. The cost of healthcare, in particular, is expected to rise significantly over the next decade. Retirees need to plan for these increases without assuming the market will always deliver the returns needed to keep up.

This is why we recommend building inflation protection into your retirement plan from the start. This might include allocating a portion of your portfolio to assets with inflation hedging potential, such as real estate, Treasury Inflation-Protected Securities (TIPS), or indexed insurance products. Healthcare-specific planning, such as long-term care coverage or health savings accounts (HSAs), also plays an important role in preserving wealth.

A Retirement Plan That Gives You Peace of Mind

The market will go through ups and downs, but your retirement income should not. With the right strategy in place, you can protect what you have built, maintain your lifestyle, and leave a lasting legacy.

At NPPSS, we specialize in helping high-income earners navigate the complexities of retirement with confidence. We do more than just manage investments—we help you design a complete plan that adapts to changing markets and supports your goals over the long term.

If you are looking for a smarter, steadier way to retire, we are here to help.

Schedule a consultation with NPPSS to learn how to build a retirement strategy that keeps you secure, regardless of market conditions.