If you’re getting ready to retire—or already enjoying retirement—seeing your account balances drop stirs up anxiety, uncertainty, even fear. But there are things you can do to regain a sense of control, protect your income, and stay on track.

While market downturns are unsettling, there are strategies you can use to lessen the impact on your retirement. The key is knowing how to respond with purpose, not panic. It’s not about drastic moves; it’s about flexibility, staying informed, and protecting the long-term health of your retirement.

Risks of Selling in a Down Market

Before taking any action, it’s important to understand the risk of selling investments during a downturn. Sometimes investors react to a market downturn by selling stocks, trying to protect what they’ve saved. But by selling early, you lock in a low value that might have been temporary.

If you’ve been investing for years, your portfolio could include a lot of long-term growth. When you sell during a dip, you take a hit and miss out on a chance for those investments to recover when the market rebounds. Do your best not to let emotions dictate when or if you sell assets, preventing the potential of turning short-term volatility into lasting damage.

Time Withdrawals Strategically

There are ways to time your withdrawals strategically to help your most volatile investments rebound with the market; seek advice from a professional before making any drastic decisions to your investment or withdrawal strategies.

In general, however, to help protect the wealth you’ve built, one approach is to delay withdrawing from the most affected parts of your portfolio; these are the assets that lose value quickly during downturns like individual stocks, stock mutual funds, and Stock ETFs.

If you need to withdraw, do so from the least-affected parts of your portfolio first. Things like cash or money market funds, fixed-income investments like bonds or bond funds, and CDs or share certificates tend to be more stable than stocks and don’t fluctuate as dramatically during downturns. Using them to fund your living expenses gives your stock-based investments time to recover, rather than forcing you to sell them at a loss.

You’ll also want to avoid needless withdrawals or discretionary spending while the market is down. Try to postpone or scale back large withdrawals until prices recover.

What if you have to take required withdrawals?

If you're 73 or older, it’s mandatory for you to take Required Minimum Distributions (RMDs) from traditional retirement accounts, even in a downturn. While you can’t skip them, you can be more strategic by considering the following:

• Withdraw from conservative assets first (bonds or cash) to avoid selling stocks at a loss.
• Consider an in-kind transfer: instead of selling an investment to generate cash for your RMD, transfer the investment out of your retirement account and into a taxable brokerage account. This may help you avoid selling low. Keep in mind, however, that you will owe income tax on the amount transferred. Make sure to seek advice from a financial advisor before doing an in-kind transfer.
• Time your RMD wisely. You have until December 31 each year to take the RMD (or April 1 for your first RMD), so you may be able to wait for a market rebound.

Utilize the Bucket Strategy

The bucket strategy divides your retirement savings into three time-based “buckets”—each designed to serve a different purpose based on when you’ll need the money and your risk tolerance.

Bucket 1: Short-Term (0–2 years)

This bucket gives you easy access to funds when you need them, without having to sell investments during a market dip. Having 1–2 years’ worth of essential expenses in this bucket helps you ride out short-term volatility. Use this bucket for daily expenses and immediate income needs.

• Cash
• High-yield savings accounts
• Money market funds
• Short-term CDs

Bucket 2: Mid-Term (3–5 years)

This middle bucket is meant to be more stable than stocks but offer a little more growth than cash. It serves as a bridge between your short-term needs and long-term goals. Use this bucket for near-future spending that doesn’t need to be accessed immediately.

• Short- to intermediate-term bond funds
• Individual bonds
• Conservative balanced funds

Bucket 3: Long-Term (5+ years)

This is where you keep the investments with the most potential to grow—but also the most potential to swing during downturns. Try not to touch this bucket during volatile periods; let it recover and grow over the years, replenishing the other buckets as needed when the market is stronger.

• Stocks
• Stock mutual funds or ETFs
• Growth-oriented balanced funds

During a market dip, you can pull from your short- or mid-term buckets to avoid selling long-term investments at a loss. This preserves your growth assets for future years when the market is more likely to recover.

Reduce Spending

When the market is down, an effective way to protect your savings is to reduce spending. Reducing or delaying non-essential expenses helps you avoid withdrawing from your investments at a loss. Start by identifying what’s essential (housing, food, healthcare, basic bills) versus what’s flexible (travel, dining out, large purchases). Ask yourself:

• Can this expense be postponed until the market rebounds?
• Is there a smaller or more cost-effective version of this purchase?
• Am I spending out of habit or out of need?

Explore Additional Income Sources

Small sources of income can help maintain portfolio longevity. Think of this as a temporary buffer—a way to give your investments time to recover.

Part-time or Temporary Work

Can you start a temporary customer service or remote admin role? Perhaps you can substitute teach at local schools or begin tutoring students. You may even consider gig work like delivery services, pet sitting, or rideshare. Be creative! This isn’t forever, so find something interesting, different, and lower effort than your previous career.

Consulting or Freelance Work

Tap into your career experience by consulting at a relevant company or start-up, offering short-term project help or short consultations. Perhaps you can leverage your experience to teach a class or workshop at a community center or local college—or even utilize skills to freelance (writing, editing, bookkeeping, etc.).

Earn from Your Home, Hobbies, or Hidden Assets

You may already have access to producing income that you haven’t considered. For example, you can get some extra cash by renting out a room or part of your home (whether long-term or through a short-term or vacation rental service), selling unused belongings, or turning a hobby into an income stream (crafting, baking, gardening, etc.).

Social Security

Turning on Social Security during a downturn will give you additional income and may help you avoid withdrawing from your investments, but do so thoughtfully; it’s not always the smartest move. After all, starting Social Security early will reduce your monthly benefit long-term.

When Starting Social Security Makes Sense

• You need income to cover essential expenses and want to avoid selling investments at a loss.
• You don’t have enough cash or fixed income set aside to cover withdrawals from a “safe” part of your portfolio.
• You’re in average or below-average health and delaying benefits doesn’t seem likely to pay off long-term.
• You’re not planning to work anymore, or your income from work would stay below the Social Security earnings limit.

When It Might Be Better to Wait

• You have enough savings or stable income (like pensions or cash reserves) to get by without touching equities.
• You’re in good health and likely to benefit from delaying benefits in the future.
• You want to maximize your monthly benefit—every year you delay up to age 70 increases your benefit by about 8%.

You’ve Planned for This—Now Protect It

Market downturns are unsettling, especially when you’re no longer earning a paycheck and relying on savings to support your lifestyle. But the truth is, your retirement plan was built with ups and downs in mind. With the right strategies in place, you can navigate even the rockiest markets with confidence.

Whether it’s rebalancing your assets, tapping into stable income sources, or simply pausing big expenses, these small, informed decisions can make a big difference over time. You've worked hard to build your financial future, now work to protect it.