How to Deal with Stock Market Fluctuations as a Retiree

If you are retired or are nearing retirement, seeing the stock market drop may make you very stressed and anxious.


This is because a large portion of your retirement savings is likely invested whether it is in a 401(k), IRA or a similar account, and you are relying on having that money available for living expenses throughout your retirement. Although stock market fluctuations affect many people, a drop can be even more debilitating for you if that money is what you expect to use to live on in the next few years.

Investing into the stock exchange is extremely risky; that is what allows for such high returns on some investments. Any amount of money invested has the potential to be decreased, although it is very important to note that your money is not completely lost until you decide to pull out of your investments. If you hold your ground it is likely that the stock can go back up again and you may not suffer much of a loss at all, or ideally, you could end up earning a nice return.

While frustrating at times, keeping retirement money in investments is ultimately a smart thing to do because you are giving your money the potential to grow. If you keep a lot of cash on hand, that money is not growing, which is not always good option. In order to keep your money in investments and still ensure that you will have money available for your retirement, there are a few different strategies that you can follow. To learn more about how to deal with stock market fluctuations as a retiree, read the sections below.


Having both stocks and bonds is one way to balance out your portfolio since bonds hold much less of a risk than stocks do. However, bonds are not as likely to provide enough income for you as a retiree because of today’s low interest rates. Therefore, it is recommended that you do not load up on bonds and expect to receive much of an income from them. Instead, you should focus on having a more diversified portfolio with a larger amount of stocks. This means owning shares from companies of all sizes in all kinds of different industries and sectors. Investing in a wide variety of stocks can help protect against big losses because you do not have “all of your eggs in one basket,” as the saying goes.

Also, for any bonds that you do have, you should make sure that they are diversified as well. In addition to having corporate bonds you should also ensure that you have government agency and Treasury bonds as well.

One of the easiest ways to achieve a very diverse portfolio is to invest in a total U.S. stock market index fund. This is a grouping of diverse stocks that is already put together by professionals that you can participate in. Or, you could also take the time to duplicate what a total market portfolio looks like by investing into multiple different stock and bond funds. Working with a professional can also be a big help when it comes to getting your investment portfolio set up appropriately.

Play it Safe

The closer you get to retirement, the less risks you should take with your investments. The stock market is constantly fluctuating, and it can have many unpredictable spikes and drops as well. The volatility is simply a primary characteristic of the stock market and also what makes it possible to make a lot of money. However, those fluctuations can affect you much more as you reach retirement age because you are left with less time to recover. An individual in his or her 30s is better able to deal with a big drop in the stock market because he or she can likely earn that money back after a period of time. Therefore, as you enter your 50s, it is best to make sure your money is diversified and placed in areas that are less risky.

Use Alternate Income Sources

As a retiree, you should have a few different sources of retirement income available in addition to your investments. It is important to have your more guaranteed sources of income such as Social Security, pensions and annuities cover your essential living expenses. You may also consider having a certain amount of cash on hand in order to cover your expenses if you are not receiving enough income from those other sources. The recommendation is that you invest your money for a yield in the long-term, and you have cash on hand for your short-term expenses.


You may also want to divide up your retirement savings into different time periods of retirement. For the time periods further away, you can use a more aggressive investment strategy because you have more time before you need that money, which means more time to recover if the market goes south. Then for the money you will need in the next five to 10 years, you can put that money into less risky and more conservative investments.

Wait it Out

Ultimately, if the stock market plummets your best course of action is to sit tight and wait for it to correct itself. Pulling your money out will cement your losses, while waiting may end up allowing you to make your money back and then some. Panicking and removing your money from your investments can cause more harm than good in some situations, and it is important that as you near or enter retirement you wait it out when the stock market decreases. Then, if you find that you may be suffering more because you are involved in riskier options, you can make adjustments and reallocate to more conservative investments.

The stock market has seen many rises and falls over the years, and it will continue to fluctuate immensely in the future. In order to protect yourself as a retiree, one of the most important things you can do is learn to relax and not make any rash decisions. Also, it is advised that you diversify your portfolio as much as possible and stick to more conservative options if you wish to avoid such drastic fluctuations.


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