- During your early retirement years, “sequence of returns risk” could harm your portfolio when withdrawals coincide with a market dip.
- One solution, the bucketing strategy, divides your portfolio based on the timeline for spending the money, including a cash bucket for short-term expenses.
- When the stock market drops, you can use the cash bucket to cover living expenses and preserve your nest egg, experts say.
After a volatile month for the stock market, many retirees are eager to find ways to protect their nest egg from future dips.
Despite the stock market rally on Monday, there’s lingering uncertainty as investors digest tariffs and other economic policy from President Donald Trump. There was little market change by mid-afternoon Tuesday.
No one can predict market moves, but retirees can use defensive strategies, experts say.
One option, known as the bucketing strategy, divides your portfolio based on your timeline for spending the money, according to Amy Arnott, a portfolio strategist with Morningstar Research Services.
More from Personal Finance:
How investors can ready their portfolios for a recession
This inherited IRA rule change for 2025 could trigger a 25% tax penalty
There’s a ‘danger zone’ for retirees when the stock market dips
Here’s what retirees need to know about market volatility and how to use the bucket approach.
Protect from ‘sequence of returns risk’
Stock market dips can be most harmful to portfolios during the first five years of retirement, which is the “danger zone,” according to Arnott.
If you withdraw money when asset values have fallen, there are fewer funds available to capture growth when the market rebounds, she said.
The phenomenon of poorly timed withdrawals paired with stock market losses is known as “sequence of returns risk,” and it could boost your chances of outliving retirement savings, Arnott said.
Source: https://www.cnbc.com/2025/03/25/retirees-protect-portfolios-stock-market-downturn.html