Worried About Tariffs and a Recession? Here’s What Retirees Need to Know

Trade tensions are stirring up fresh concerns for retirees. While economic uncertainty isn’t new, this round of volatility is being driven more by policy changes than typical business cycles. As a result, you might be wondering how to best protect your retirement savings.

Financial experts stress that most retirees should stay focused on a long-term strategy. That includes reviewing withdrawal plans, building flexibility into spending, and maintaining realistic expectations about market ups and downs.

Don’t Make Sudden Moves With Your Withdrawal Strategy

While tariffs and inflation may rattle the markets, most retirees don’t need to change their withdrawal plans immediately.

Kevin Jestice, CFA, CIPM, and Head of Nationwide’s Investment Management Group, said this is not the time for rash decisions. “Volatile times like this…are really good times to engage in a conversation with their financial advisor about whether their needs and circumstances have changed,” he said.

For retirees already drawing down their savings, maintaining flexibility around discretionary spending can help reduce the need to sell investments in a downturn. If you can afford to delay some purchases or scale back temporarily, you may avoid locking in losses. 

On the flip side, market dips may offer a chance to buy at lower prices for those still contributing to their retirement accounts. But, as Jestice put it, “Stocks are one of the few things people don’t like to buy at a discount,” even though they can represent good value during periods of market stress.

Stick With Long-Term Allocation, But Consider Evolving Need

Short-term volatility, even when sparked by trade policy or interest rate fears, doesn’t justify a major portfolio overhaul for most retirees. “We wouldn’t recommend a significant asset allocation change as a result of a short-term phenomenon,” said Jestice, noting that many Americans now need their retirement savings to last multiple decades.

People retiring at 65 today may spend 20 to 30 years or more in retirement, which means their investments must continue working long after their final paycheck. In fact, Jestice noted a growing trend toward slightly higher equity allocations among older investors compared to previous generations, reflecting longer life expectancies and the need for continued growth.

Some retirees also turn to products offering income guarantees, such as annuities, to help buffer against market swings. While these tools aren’t right for everyone, they can help reduce volatility and provide more predictable income in uncertain times. As Jestice explained, these guarantees “change the risk-return profile of the total portfolio” and are increasingly seen as a complement to traditional allocations.

Cash Cushions Still Matter, But Don’t Overdo It

Maintaining some cash on hand is important for covering unexpected expenses, especially in retirement. But too much liquidity can hinder long-term growth. According to Jestice, retirees shouldn’t pivot in and out of cash in reaction to market headlines. “Stick with the plan that’s designed around your savings goals and time horizon,” he advised.

While a modest cash buffer can provide peace of mind and short-term flexibility, holding large amounts on the sidelines can mean missing out on growth opportunities. Especially during volatile periods, staying invested is often the better long-term move. Investors who maintain their original asset allocation strategy are typically better positioned to benefit from eventual market recoveries.

Sequence Risk Calls for Spending Flexibility

Retirees face the greatest risk when markets dip early in retirement—a concept known as sequence of returns risk. Market losses in those first few years can have a large impact on long-term portfolio health. That’s why spending flexibility becomes such a powerful tool.

Here’s how retirees can protect their savings during turbulent times:

• Reduce or delay discretionary expenses to avoid selling investments while values are down.
• Minimize debt, since fixed payments are harder to manage without steady income.
• Adjust withdrawals when possible, especially in years when the market underperforms.
• Build flexibility into your budget, so you’re not locked into a rigid spending plan.

Even small spending adjustments in response to market conditions can help your investments recover and last longer.

What Experts Are Watching Now

While tariffs have been front and center in recent headlines, they’re just one of several economic signals experts are watching closely. Jestice emphasized that tariffs may not directly impact individual retirees, but the ripple effects can create market swings that affect everyone’s portfolio.

Other key indicators include the shape of the yield curve, which helps signal investors’ expectations about future interest rates and recession risk, and ongoing trends in inflation. Persistent inflation can be especially harmful for retirees on fixed incomes, eroding purchasing power over time. Corporate earnings are also under the microscope, as their strength or weakness can indicate how resilient the broader economy might be in the face of policy shifts or global uncertainty.

Together, these signals help financial professionals gauge where the economy may be headed and how retirees should position themselves for the months ahead.

The Bottom Line

If you’re retired or approaching retirement, headlines about tariffs and economic volatility can be unsettling. But the fundamentals still apply: stick with your long-term plan, explore options for guaranteed income if appropriate, and be willing to adjust spending if needed.

Take advantage of any financial education tools available through your retirement plan or provider, even if you don’t work with a financial advisor. And remember, your time horizon is probably longer than you think. As Jestice put it, “There’s no better time to begin investing in a retirement plan than the present, regardless of the market volatility.”