A Calm Way to Ride Out Market Swings in Retirement
When markets fall during retirement, the account balance may not be the first worry. The more immediate question is often whether the next withdrawal will require selling investments at lower prices.
That is why volatility can feel different once a portfolio is helping fund everyday life. A market decline can quickly become a question about where spending money should come from.
Two portfolios can earn similar average returns over time and still support different outcomes when withdrawals are underway. Losses early in retirement can be harder to recover from because money is leaving the portfolio at the same time. The interaction between returns and withdrawals is known as sequence risk.[1]
What helps more than willpower in a rough market?
“Stay the course” can sound reassuring when markets are calm. It is harder to follow when the next withdrawal is approaching and the plan does not show where that money will come from.
A plan becomes more useful when it identifies how much money is available soon. It should also show which assets have more time to recover. Clear review points can then define when a change deserves consideration.
That structure does not prevent market losses. It can reduce the chance that a stressful week becomes the reason for an unplanned sale.
Dovetail Principle: Planning Helps You Decide When the Future Is Unclear
When the plan identifies which dollars can be used now and which can wait, short-term market movements do not have to dictate the next long-term move.
What job does each dollar need to do?
The first question is what must be paid soon. After that, the plan can identify money that should remain available if something changes. Dollars not expected to be used for years may have a longer-term growth job.
Some households make these roles visible through a bucketed approach. The labels and timelines can vary, but the basic purpose is to connect investment risk with the expected timing of each need.[2][3]
A bucket system is not a guarantee or a universal formula. It is a way to see which dollars need more stability and which may have time to recover from a decline.
How can near-term spending get breathing room?
A spending bridge may hold money intended for upcoming cash withdrawals or less-volatile investments. The appropriate amount depends on the household’s income and spending. It also depends on how much market risk the plan can absorb.
If a decline arrives, the bridge may provide time before assets intended for later years need to be sold. It does not eliminate risk, and it will eventually need to be replenished.[2][3]
The replenishment approach is easier to consider when markets are calm. The plan can identify when the reserve should be refilled. It can separately define when spending or the portfolio needs another review.
Should every withdrawal decision start with the portfolio?
A market decline may prompt someone to use cash rather than sell an investment. Another response may be to temporarily adjust discretionary spending. Each choice affects the plan differently.
The account used for a withdrawal can matter, too. A sale in a taxable account may create a capital gain or loss. A larger traditional IRA withdrawal can increase taxable income.
Income changes can also affect Medicare costs. Higher-income beneficiaries may pay an additional amount for Medicare Part B and prescription drug coverage.[6]
That does not mean one withdrawal source is always better. It means the withdrawal order should be reviewed, besides income and taxes, rather than decided based on the account balance alone.
That is also why retirement investment management belongs inside the broader retirement plan.
Should the portfolio follow purpose or headlines?
The portfolio should reflect when the money may be needed. It should also reflect how much fluctuation the plan can reasonably absorb.
Changing the portfolio because markets have already fallen creates another difficult decision: when to get back in. Historically, some of the market’s strongest days have occurred close to its worst days. Missing a brief recovery can materially affect long-term results, although past patterns cannot predict what will happen next.[4]
Staying invested does not mean the portfolio should never change. It means changes should come from the plan, a change in circumstances, or a mismatch between the portfolio and its purpose. Headlines alone are not a review process.
What should you review when markets are noisy?
Foundational behavioral research describes “myopic loss aversion” as the combination of heightened sensitivity to losses and frequent evaluation. It helps explain why a long-term investor may experience a normal short-term decline as an urgent problem.[5]
Instead of letting every market update become a new decision, return to the plan’s review points.
Has near-term spending changed?
Is the spending bridge still adequate?
Does the portfolio still match the job assigned to each dollar?
Has the income or tax picture introduced a new constraint?
A “yes” may justify a closer review. A difficult week in the market, by itself, may not.
How does clarity help when prediction is impossible?
No structure can remove uncertainty from investing. The goal is to make fewer decisions depend on predicting what markets will do next.
A calmer response begins with one question at a time. What must be funded soon? Which dollars have time to wait? What specific event would call for a change?
If recent market swings have made you uneasy, that feeling does not automatically mean the plan is failing. It may be pointing to a part of the plan that is difficult to see.
The goal is not to feel anything when markets fall. It is to understand what the concern is asking you to review before it becomes an unplanned action.
Related Reading: The Better Safety Question in Retirement: What Should Each Dollar Do?
About the Author
Ross Marino, CFP®, CeFT®, is the Founder & CEO of Dovetail Financial and creator of Human-First Financial Guidance®. He helps people nearing or living in retirement connect their lives and wealth so that financial decisions become clearer, more personal, and easier to navigate.
Notes
1. Capital Group, “Is sequence-of-returns risk really sequence-of-withdrawals risk?”
2. Morningstar, “How Do You Maintain a Bucket System for Your Retirement Portfolio?”
3. Vanguard, “Retirement risks and how to manage them.”
4. J.P. Morgan Asset Management, “Navigating market volatility: A guide for retirement investors.”
5. Shlomo Benartzi and Richard H. Thaler, “Myopic Loss Aversion and the Equity Premium Puzzle,” National Bureau of Economic Research.
6. Social Security Administration, “Medicare Premiums.”
Disclosure
Disclosure: This content is provided by Dovetail Financial Group LLC (“Dovetail Financial”) for informational and educational purposes only. It is not intended as, and should not be construed as, individualized investment, tax, legal, or accounting advice; a recommendation to buy or sell any security; or a recommendation to adopt any investment strategy. Because each person’s situation is unique, readers should consult their own financial, tax, and legal professionals before taking action based on this content.
Information contained herein is believed to be reliable, but its accuracy or completeness is not guaranteed. Any opinions expressed are current as of the date of publication and are subject to change without notice. All investing involves risk, including the possible loss of principal. Asset allocation and diversification do not guarantee profits or protect against losses in declining markets. Past performance is not a guarantee of future results.
Dovetail Financial Group LLC is a registered investment adviser. Registration does not imply a certain level of skill or training. Additional information about Dovetail Financial Group LLC, including Form ADV Part 2A and Form CRS, is available at adviserinfo.sec.gov. © 2026 Dovetail Financial Group LLC. All rights reserved.
