Don’t Let a Market Crash Crush Your Retirement

10 7 minutes read

The market downturns of 2025 have left many retirees and pre-retirees feeling uneasy.

With AI giants like Nvidia plummeting 17% in a single trading day, interest rate shifts rattling investor confidence and escalating trade tensions under the Trump administration, it’s understandable to question the stability of your retirement plans, especially when the fear of losing years of progress feels so real.

But at Barnett Financial & Tax, we believe that while you can’t control the markets, you can prepare for them.

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The Kiplinger Building Wealth program handpicks financial advisers and business owners from around the world to share retirement, estate planning and tax strategies to preserve and grow your wealth. These experts, who never pay for inclusion on the site, include professional wealth managers, fiduciary financial planners, CPAs and lawyers. Most of them have certifications including CFP®, ChFC®, IAR, AIF®, CDFA® and more, and their stellar records can be checked through the SEC or FINRA.

A market downturn doesn’t have to undo your retirement. In fact, with the right strategy, it can be managed, particularly when your income is supported by a diversified and adaptable foundation.

Here’s how to maintain a steady financial footing, even when the markets wobble and dip.

Look under the hood of your ‘diversified’ portfolio

It’s easy to assume your portfolio is diversified if you own a mix of mutual funds or ETFs. But in reality, many of these funds hold the same top-performing tech stocks. In 2025, the so-called Magnificent 7 — Apple (AAPL), Alphabet (GOOGL), Microsoft (MSFT), Amazon.com (AMZN), Meta Platforms (META), Tesla (TSLA) and Nvidia (NVDA) — still dominate major indexes like the S&P 500.

That means if the tech sector drops, even a portfolio that looks diversified on paper could take a big hit.

Pro tip: Don’t stop at the fund name. Dig into the actual holdings of your investments to identify hidden overlaps.

If multiple funds are leaning heavily on the same mega-cap stocks, that’s not true diversification. Look to broaden your exposure with assets that behave differently, such as small-cap value stocks, dividend-paying companies, commodities or structured notes.

Diversification works best when it’s spread across sectors, strategies and time horizons, not just fund wrappers.

Avoid selling low by planning your withdrawals wisely

One of the biggest financial risks retirees face isn’t just how much they’ve saved — it’s when they start withdrawing it. This is known as sequence of returns risk, and it can quietly undermine even the best-laid retirement plans.

Here’s how it works: Imagine two retirees with identical portfolios and identical average returns over 30 years. Let’s say one experiences a market downturn in the first few years of retirement, while the other doesn’t hit turbulence until year 10.

Even though their average returns are the same, the first retiree ends up with significantly less money in the long run simply because they had to sell investments at a loss early on, locking in lower values and reducing future growth potential.

And that’s the catch: It’s not just how much the market returns over time, but when those returns occur.

Pro tip: We suggest creating a cash buffer. Having 12 to 24 months of living expenses set aside in cash or short-term bonds gives you flexibility when the market dips. You avoid selling your investments at the wrong time, giving them a chance to recover.

When markets bounce back, you can replenish the reserve from gains instead of losses.

This one adjustment can help smooth out income flows and protect your long-term retirement outlook.

Rethink the 4% rule and let performance guide your income

The old rule of thumb that says you can safely withdraw 4% of your portfolio each year in retirement has been a staple of financial advice for decades. But in today’s volatile market environment, sticking to a fixed percentage could do more harm than good.

Here’s the problem: A rigid withdrawal strategy doesn’t account for what the market is doing in real time. If you continue taking the same amount during a downturn, you might end up pulling from a shrinking asset base, accelerating the risk of running out of money sooner than expected.

This is especially concerning in a market like the one we’re seeing right now, where performance has been anything but predictable.

With inflation still sticky, interest rates shifting and tech stocks swinging sharply from one end to the other, your retirement income strategy needs to adapt as conditions change.

Pro tip: One idea is to implement a dynamic, performance-based withdrawal strategy. A widely used approach is known as the guardrails approach. Here’s how it works:

Set a target withdrawal rate (for example, 4%) but define upper and lower “guardrails” around it, such as 3% on the low end and 5% on the high end.
In years when your portfolio performs well, you can increase your withdrawal slightly, staying within the upper guardrail.
In years when the market dips, reduce your withdrawal rate to preserve capital and give your investments time to recover.

This strategy allows your income to flex with market performance, helping extend the life of your portfolio and reducing the odds of prematurely draining your savings.

Flexibility doesn’t mean uncertainty. Think of it instead as a form of control. When you respond to market conditions rather than ignore them, your withdrawal plan becomes part of your risk management toolkit.

Fill income gaps with guaranteed sources

Market volatility is a fact of life, but the security of your retirement income doesn’t have to swing with it.

Pro tip: Diversifying your income sources is one way to add stability, and annuities are regaining attention as a tool that can provide exactly that.

Thanks to higher interest rates, certain fixed and fixed indexed annuities now offer some of the most attractive payout rates since 2008, with no direct exposure to stock market losses.

These products aren’t one-size-fits-all, but for many retirees, they offer a way to create predictable, steady income that isn’t tied to market performance.

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We recommend that you take inventory of your guaranteed income sources, like Social Security or a pension. If there’s a gap between those and your monthly expenses, consider whether a properly structured annuity could help fill that gap.

Take care to look for options that strike a balance between income stability and access to liquidity.

Don’t make short-term decisions with long-term money

When markets drop, it’s natural to feel anxious, but letting fear drive your financial decisions can be costly.

Panic-selling during a downturn locks in losses, often just before the market begins to rebound. History shows that recoveries can happen quickly and without warning, and those who step to the sidelines often miss the strongest days of market performance.

Pro tip: That’s why a written retirement plan is so important. It’s your blueprint for navigating volatility, and it can help you avoid reactive decisions based on headlines or emotion.

Try using your plan as a filter for decision-making. Before making changes, ask yourself: Has my time horizon changed? Have my goals shifted? If the answer is no, your plan may not need to change either.

Review your asset allocation annually, preferably at a scheduled time, not during market turmoil, and make adjustments only when your circumstances do. In the meantime, trust the process you’ve already built to weather downturns.

The bottom line

Market downturns are inevitable. But history has shown us time and again that while markets may stumble, they also recover (often faster than expected).

The real risk to your retirement isn’t short-term volatility; it’s how you respond to it.

Reacting impulsively during a dip can lock in losses and undermine the long-term strategy you’ve worked hard to build. That’s why resilience, flexibility and discipline matter just as much as asset allocation.

Stay the course. Revisit your financial plan regularly, not reactively. If your goals and time horizon haven’t changed, your strategy may not need to either.

Make adjustments deliberately, not emotionally, and rely on the foundational decisions you’ve already made to guide you through turbulent times.

At Barnett Financial & Tax, we believe that retirement security isn’t just about growing wealth, it’s about protecting it.

That means preparing for volatility, designing income that lasts and having the flexibility to adapt as life and markets evolve.

A market crash isn’t the end of your financial journey, just a detour that a well-built plan can confidently navigate.

About the authors

Rick Barnett is the Founder and CEO of Barnett Financial & Tax, a 35-year-old comprehensive financial advisory firm covering all aspects of Investment, Income, Tax and Estate Planning. Rick and his team serve clients in Michigan, North Carolina and several other states. Rick hosted the “Barnett Financial Hour,” broadcast on numerous radio stations over a seven-year span and has shared financial expertise on ABC, CBS, NBC and Fox 66 News networks. His genuine passion lies in educating people, having conducted hundreds of financial education programs through his organization, Financial Leadership University.

Parker Barnett grew up watching his father, Rick, set a new standard in the financial services industry. Witnessing the Barnett Financial & Tax team create lasting solutions and personalized financial plans deeply influenced Parker’s professional approach. Graduating from Judson University with a focus on accounting, Parker’s academic journey laid the groundwork for his commitment to providing comprehensive financial guidance. To offer versatile and knowledgeable service to his clients, Parker earned his Series 65 license along with life insurance, accident and health licenses. This extensive training ensures he is well-equipped to address the diverse needs of his clients.

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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