Were You Planning On Retiring in the Next Year? What To Do In The Face of Tariff-Related Stock Market Volatility

Some Americans retiring in the next year may have smaller savings due to recent market volatility. However, there are ways to combat and protect your retirement plan, a wealth manager says.

Last week, President Donald Trump imposed “reciprocal” tariffs on imports from many foreign countries. Investors began selling stocks, and major indexes fell to their lowest level since the COVID-19 lockdown.

Although Trump issued a 90-day pause on “reciprocal” tariffs except those against China, stock indices were still down again Thursday morning. The volatility is impacting many Americans’ 401(k) retirement plan savings amounts, which typically rise and fall with the stock market.

While many 401(k) investors will get their money back once stocks go back up, those who plan to retire over the next year may enter retirement with smaller savings. About 4.1 million Americans will turn 65 this year, and they may need to make some changes to their retirement plans, said Jake Falcon, CEO of Falcon Wealth Advisors.

Investopedia asked Falcon how 401(k) investors on the cusp of retiring can deal with tariff-related stock market volatility. The interview has been edited for brevity and clarity.

INVESTOPEDIA: How will the stock market’s current volatility specifically affect those planning to retire in the next year?

JAKE FALCON: Market disturbances can significantly impact the retirement funds of those planning to retire soon. When the stock market experiences volatility, the value of retirement portfolios, which often include a mix of stocks, bonds, and other assets, can fluctuate dramatically.

If the market drops significantly just as someone begins to withdraw from their retirement savings, they may have to sell assets at a loss, reducing the overall value of their portfolio and potentially jeopardizing their long-term financial security.

INVESTOPEDIA: What are some things that recent retirees or those on the cusp of retiring can do to make up for their losses due to stock market volatility?

FALCON: Let’s say you just retired, and you didn’t have the appropriate asset allocation to begin with. That’s when you really need to meet with a financial planner. And if you do need to make adjustments, you’ve got to understand the long-term implications. 

In an extreme circumstance, and you’re retired, you may need to go back to work. So if you have your asset allocation wrong, and you’re retired, and now your plan is not going to work, then the best thing to do is cut your spending here, which is harsh, and people don’t like to hear that, but that’s why it’s so important to do retirement planning before you retire, and make sure that you have market cycles like this factored in before they happen.

This also may be a time to look at IRA to Roth conversions because your stocks are down. It’s a great time to do that or potentially tax-loss harvesting if you want to sell some stocks in a brokerage account. We’re looking at the losses that may be an opportunity. Also, market crashes aren’t always a bad thing. There are opportunities to actually enhance your plan.

INVESTOPEDIA: How should soon-to-be retirees address the impacts of the recent market volatility?

FALCON: I like to use an acronym called SEE … it’s from [corporate coaching firm] Vision Pursue.

First, ‘separate’ from the events that are occurring and try to look at your picture as if you’re an outsider. So my whole key here is that I’m trying to coach them to gain some objectivity, look at the facts, and look at their financial plan. 

Two would be E— ’embrace.’ I want them to embrace their emotions fully, feel whatever they’re experiencing, and understand that emotions are short-term and will come and go.

The third piece would be ‘evaluate’. So again, after they have fully separated from the situation, they’ve embraced their emotions. Now, what actions do they need to take? Do they need to set an appointment with their financial planner? Do they need to look at Roth conversions or tax loss harvesting? Is their allocation not appropriately aligned with their financial plan, and if they do make an adjustment, what does that do to the plan? Do they need to look at going back to work or cutting their spending?