Almost everyone has found themselves unnerved by recent events in one way or another. Many workers have likely thought nervously about their job security in the face of recessionary storm clouds, and consumers have pondered whether, when, and where they would see higher prices. And of course, investors have been watching stock and bond prices ping-pong. 

But if there is a single group of people who are likely to be experiencing the most consternation over recent market events, it is those who have just retired or who are on the cusp of hanging it up. The past two years’ worth of robust gains had enlarged portfolio balances, and research suggests that this tends to prompt retirements. Most new and near-retirees had likely internalized the possibility of a big market correction at some point in their retirements, but they probably had not envisioned one so soon—or punctuated by quite as much economic uncertainty (Recession? Inflation? Both?)—as the current downturn. Pulling money from a portfolio is a psychological challenge in the best of circumstances, but especially after it has posted losses.

As with most things in life, the key for new- and near-retirees making it through this period with their sanity intact is to focus on what they can control—and to back-burner what they cannot. The following are the key jobs to focus on.
 

Assess Spending Rate 
People who have just retired or are about to do so are particularly vulnerable to what retirement researchers call sequence-of-returns risk, which means that a bad market shows up early in your retirement. Not only does that early retirement selloff feel bad, it actually is bad because it imperils your portfolio’s ability to last throughout your retirement years. In a recent study, Jeff Ptak and Tao Guo found that the people most likely to run out of money in retirement were the ones whose portfolios lost value in the first five years of their retirements.

Retirees who are pulling cash flows from their portfolios can address that risk by adjusting their spending down to ensure that more of their portfolios are in place to recover when the market eventually does. And the good news is that those adjustments do not need to be radical to make an impact. In our retirement income research, we found that even small tweaks like forgoing an inflation adjustment following a bear market help ensure that spending lasts over a whole 30-year period and can lead to more lifetime income than a strategy that ignores market movements.

If you have not yet retired, this is a great opportunity to assess your planned in-retirement spending and identify where you would be willing to make cutbacks if you needed to do so. It is also a wonderful time to turbocharge savings if you can afford to do so. Catch-up contributions are available to all retirement savers who are over age 50. And if you are between the ages of 60 and 63, you can make a “super-catch-up” contribution to your company retirement plan, for a total of $34,750 in 2025.
 

Pull Cash Flows From Safer Assets 
Another valuable way to address sequence risk relates to where you are spending from. Ideally, you would pull any portfolio cash flows from safer assets and leave your stock positions undisturbed. That is the general logic behind the Bucket approach to portfolio construction. In good years for the stock market, like 2023 and 2024, you would be harvesting appreciated equity assets to supply your income needs. In bad ones, like 2022 and the year to date, you are not touching stocks but instead sourcing cash flows from high-quality bonds, cash, or a combination of the two.

Using that same general logic, you may even want to reinvest income distributions back into securities that have recently lost value rather than spending them. While a key attraction of dividend-paying stocks is their income, reinvesting those income distributions can help you put more money to work in stocks when they are down.

Of course, some retirees may find that their portfolios are riskier than they should be, even factoring in recent equity losses. In that case, it can be argued that it is not too late to shift into a more situation-appropriate asset allocation that includes exposure to cash and bonds.
 

Play the Long Game with Social Security 
If pulling too much from a portfolio during down markets is a bad idea, filing for Social Security might look like a compelling way around that. But it could be a mistake to let what we hope will be a short-lived downturn steer you away from the lifetime benefits of delayed Social Security: a higher income stream that also happens to be fully inflation-protected and will last as long as you do. Delayed filing can be particularly impactful if you are the higher earner in your family and you have a younger spouse who will receive that higher benefit for his or her lifetime.

In some retirement income research, the pros and cons of delayed Social Security filing was focused on. It was found that delaying filing up until age 70 did enlarge lifetime income, but the benefits are greatest if you have some other source of funds to draw from until your benefits start. And the benefits are also obviously more valuable for people with above-average life expectancies, in that they stand to receive those higher streams of inflation-protected income for a longer period of time.

If you need funds and have to choose between filing for Social Security and pulling from a depressed equity portfolio, you could consider filing for Social Security and then doing what is called a “withdrawal of benefits” within a year of when you initially filed. That allows you to suspend your current benefits and refile at some later date. The tricky part is that you will need to pay back all of the benefits that you received before you put in for a withdrawal of benefits, along with any family benefits and money withheld from your Social Security to pay your Medicare premiums, for example. For this to be a good strategy, your portfolio would have to recover and then some within a 1-year period. In other words, it is not foolproof.
 

Revisit Inflation Protection 
Even without the threat of tariffs, inflation is a key risk for retiree portfolios, because the income you receive from your safe investments is going to buy you less and less as you age. Moreover, retirees tend to spend more on healthcare, where prices have historically increased faster than the general inflation rate. Tariffs add to the threat of higher inflation.

Many retirees focus exclusively on nominal bonds and underrate the value of inflation-protected bonds as a component of their retirement plans. Morningstar’s Lifetime Allocation Indexes stake about a fourth of the bond positions in short-term Treasury Inflation-Protected Securities for people who have just retired. Most of the better target-date series are in that same ballpark. Another strategy is to build a laddered portfolio of TIPS that will mature and supply you with living expenses throughout your retirement; you could determine how much to buy in TIPS by looking at your fixed annual spending needs and subtracting out the amount that you expect to receive from Social Security.
 

Annuities: A Lifetime Income Stream 
Finally, one small silver lining in market volatility is the opportunity to save on taxes. The early-retirement years are typically an excellent time to consider converting traditional IRA balances to Roth. The reason is that without income from work and because you would not be subject to required minimum distributions until you are 73, your income and, in turn, the taxes that you will owe on conversions will be lower. The fact that your portfolio has likely fallen so far this year provides an even more conducive environment for conversions.

The recent market volatility also presents tax-loss sale opportunities—a valuable strategy at any life stage. If you had recently purchased holdings that are now underwater, you can sell and book a tax loss that can be applied to capital gains elsewhere in your portfolio or carried forward indefinitely.