Wealth Insights

When markets shift, should your retirement plans?

A goals-based approach should be used to help investors navigate uncertainty, balance risk, and make informed decisions about retirement.

Key takeaways

• Market volatility doesn't have to derail retirement plans. Revisiting your financial strategy may help ensure your investments remain aligned with your goals and priorities.
• Retirement planning should focus on purpose, not short-term market performance. Major decisions should support long-term objectives rather than quick reactions to temporary market swings.
• Sequence-of-returns risk matters for new retirees. Market losses just before or during retirement have been known to affect how long a portfolio lasts, making thoughtful planning especially important.
• Longevity risk deserves attention. Longer life expectancies may require retirement assets to support lifestyle and health care for 20 to 30 years or more.
• Risk tolerance is personal. Investment decisions should reflect your unique objectives, timeline, and comfort with risk rather than market sentiment or outside opinions.
• Regular reviews are intended to identify planning opportunities. Periods of volatility may offer a valuable opportunity to reassess spending assumptions, income strategies, and portfolio allocations.

“Markets are forward-looking, but they are not always farsighted.” Regions Chief Investment Officer Alan McKnight has his finger on the pulse of the markets. He has been following them for more than 30 years and regularly shares his insights with national news outlets, investors, and weekly with clients through email and webcasts. He has seen this all before. “Investors often spend enormous energy predicting the next headline, when long-term outcomes are usually driven by a handful of durable forces: earnings growth, interest rates, productivity, and human ingenuity.”

No one welcomes instability, particularly when it comes to investing. When markets are volatile, your instinct may be to act. You may be inclined to look for a safe haven or seek out corners of the market. Or you may simply prefer to ride it out until your investment portfolio starts gaining back any losses.

Smart wealth planning treats these typical human impulses as factors to hedge against, especially when market downturns produce painful declines in portfolio values. “It comes down to this: Don’t let the markets control you,” says Bryan Koepp, Wealth Planning Executive at Regions Bank. “Instead, focus on the factors you can control as best you can by identifying your key priorities and objectives.”

While this advice applies to investors of any age, it is particularly relevant to current or soon-to-be retirees, or anyone who is questioning their retirement plans due to recent market volatility. Wealth management is an ongoing process. Volatility signals an opportunity to revisit your priorities and, if necessary, adjust your allocations to stay on track. “Evaluating the possible outcomes is the essence of wealth planning exercises,” Koepp says.

What Is distinctive about recent market volatility?

Market volatility is a fact of life, but recent volatility is primarily driven by geopolitical forces rather than underlying economic fundamentals. “Markets have been incredibly resilient in recent years despite the uptick in geopolitical noise,” says McKnight. “Nevertheless, we are firm believers in the value of broad diversification across asset classes to minimize the day-to-day whims and vagaries of the various markets. As the Swedish saying reminds us, ‘there is no such thing as bad weather, only bad clothes.’”

On the flip side, continued high levels of inflation have left many investors feeling the pinch of higher day-to-day prices coupled with borrowing costs that well outpace where they were after the pandemic.

Consider your goals and lifestyle

No matter what happens to your investment returns, this period of volatility may lead you to revisit your financial plans with your goals and priorities in mind. “That means balancing performance with purpose,” Koepp says. “Ask yourself, ‘Is retiring within the next two years still the most important goal? Are there expenses that will come due, like a child’s education, medical needs or travel goals? If you want to retire when planned, have you worked through a wealth planning exercise that can be used to forecast that potential volatility may have on your retirement strategy?’ Volatility, in and of itself, is not always negative. Volatility may present the opportunity to strategically align for a better future outcome without sacrificing purpose.”

With the answers in mind, your Regions Wealth Advisor can test a few hypotheses and help you review your options.

Is the time right to retire?

For recent retirees, portfolio volatility may make the transition from the workforce more worrisome. Even short-term investment losses just before or after you retire, referred to as sequence-of-returns risk, may have implications for your portfolio’s longevity.

“Psychologically speaking, volatility can have a huge impact,” McKnight says. “We’ve seen investors who are a few years from Medicare eligibility put money to cover their insurance coverage gap health expenses into health savings accounts or T-bills.” Solutions that bring peace of mind and make sound financial sense are the goal.

Have you accounted for longevity?

With Americans living longer, the risk of a retirement planned to last 15 years stretching to 20 or 25 years is real. “If you’re 65, there’s a real possibility that you’ll be here until 90 or even longer. That’s longevity risk,” McKnight says. “A volatile market is a good time to go back, test your assumptions and priorities, and see what is possible given the financials.”

Longevity risk may lead some retirees to take more investment risks for the chance of higher returns. “We see some high-net-worth families going into private equity,” McKnight says. “The concurrent risk is that they’ll have less access to capital, which is fine, so long as you know that risk exists, and you’re assuming it consciously.”

If your current financial plan reveals potential shortfalls over the course of a long retirement, you may want to consider reducing spending, downsizing your home or decreasing the size of the inheritance you’ve planned. In the end, McKnight says, “It comes down to what trade-offs you’re comfortable making to achieve your goals.”

Things to consider today

Whether you’re planning to retire or already drawing down your portfolio, here are three points to consider during or after a period of market volatility.

• Your risk tolerance is unique to you. The human tendency to do as others do thrives in an age of social media and viral information. Keep focused on your personal appetite for risk and how it aligns with your most important financial goals.
• Focus on goals rather than short-term performance. Any adjustments to your retirement plan need to support your long-term objectives.
• Keep doing the work. Stay engaged with your retirement plan and your advisor. Remember that even the best plan requires adjustments over time.

Talk with your Regions Wealth Advisor about:

1. Whether your current retirement plans match the current market, your portfolio and your goals.
2. How you might reconsider or redesign your retirement income plan.
3. Strategies to navigate market uncertainty and reduced asset values to help with tax mitigation and estate planning goals.

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