Market volatility: How to help safeguard your retirement plans now

Still, it’s important to know that these challenges can be managed in partnership with your team at the Private Bank. Below, and in order of importance, are actions to consider to ensure your plan stays the course:

1. Determine risk capacity: A well-crafted wealth plan begins with understanding how much volatility your portfolio can withstand without running the risk of exhausting assets prematurely or upending your spending plans. Stress testing your balance sheet based on your spending goals over time, inflation and poor market outcomes can help ensure your plans are able to withstand market turmoil without needing to course correct. Done properly, this will hold true regardless of the cause of the downturn.
2. Lean on cash for spending: As you head into retirement, it’s critical to right size the liquidity sleeve of your balance sheet. This sleeve should be sufficient to cover two to five years’ worth of annual spending, as well as larger near-term purchases or liabilities. Still, its most important role may be as a psychological safety net. When volatility strikes, it’s time for that sleeve of your portfolio to shine. Cover your spending from cash you have on hand for this very situation so that you can let investments that have sold off recover.
3. Use leverage to your advantage: You may have assets on your balance sheet that can be leveraged to prevent you from liquidating while volatility is heightened. For example, permanent life insurance policies with cash value can typically be borrowed against. This strategy would lower the death benefit until the loan is repaid, and insulate your portfolio from withdrawals in the near term as markets recover.
4. Dynamic withdrawal strategy: The resilience of your plan can increase exponentially if you are willing to adjust withdrawals when volatility strikes. Leaving yourself room to taper spending when markets are down can be a very effective way to mitigate sequence of return risk. Even small adjustments in spending can make a significant difference over time.
5. Be opportunistic with planning: Where there is risk, there is also opportunity. Look past the headlines and control the controllables. A perfect example would be converting pre-tax retirement assets to a Roth IRA. While every converted dollar is treated and taxed as ordinary income, a down market lowers the cost of that conversion—while also positioning the potential rebound so that the proceeds go to a tax-free account, allowing you to keep more of what you’ve earned.

The uncertainty around tariffs is likely to last, and it may have ongoing global implications. And market volatility is a reality all retirees will face at one point or another. By better understanding how the timing of volatility magnifies risks to portfolios, and by extension retirement plans, we can better prepare.

This is why it’s important to craft a well-considered and adaptable plan that can be adjusted based on your current needs, future goals and the market environment—and stick to it, while making strategic adjustments with your team as needed.

We can help

For more about how volatility may impact your retirement plans, as well as what you can do in response, contact your J.P. Morgan team. This may be a good time to take a comprehensive picture of your financial life. Using our proprietary Wealth Plan Plus technology, your team can analyze your assets, income and desired spending to create an analysis that projects the current path of your wealth.