Market volatility: Why are retirees particularly vulnerable?

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If you feel worried watching investment markets rise and fall, remember that volatility is par for the course when investing your money.

However, if you’re a retiree entering the “decumulation phase” – when you start drawing an income from your investments and savings – you might be feeling particularly anxious about how market volatility might affect the stability of your retirement income.

This article will investigate what market volatility is and why retirees are particularly vulnerable, including sequencing risk, panic-selling and exacerbated stress, as well as how a strong financial plan can help mitigate potential pitfalls from market volatility.

Market volatility can cause the value of your investments to jump up or down

“Market volatility” describes a rapid rise or fall in market values.

This happens in response to a variety of factors, including geopolitical events, company performance, interest rate changes and unexpected shocks.

When events cause markets to go up and down, your investments typically follow suit. This can easily cause investors to become concerned as their portfolios suddenly lose value.

However, market volatility is a natural part of investing. Just because your portfolio loses value one day doesn’t mean it won’t regain it in the future.

This is why market volatility shouldn’t necessarily deter you from remaining invested, even if you are a retiree drawing from your portfolio.

That said, retirees remain more vulnerable to market shocks compared to someone planning to decumulate in a decade’s time, so it’s prudent to be aware of some of the challenges you might face.

3 downsides that market volatility can have for retirees

Once you retire, your relationship with investing changes. Now, you need to start relying on the wealth you’ve accumulated over the course of your life as your source of income.

Here are three potential pitfalls retirees should be aware of.

1. Sequencing risk

When you begin the process of decumulating, this involves selling off your investments for cash that you use for income.

If you start withdrawing your investments during a market downturn – a period when the values of markets decline – it could have a knock-on effect on your retirement plans. This is because you would be selling investments at a lower price, which could put you at risk of running out of money later in life.

This can be particularly detrimental the larger the investments you sell; for instance, if you withdrew your entire pension lump sum during a market downturn, you could be selling 25% of your pension investments at a lower price and risking losing thousands of pounds all at once.

Taking professional advice before drawing from your pension could help you maintain control over your long-term retirement savings.

2. The risk of panic-selling

When markets rapidly decline, it can cause investors to panic and sell off their stocks and shares in order to prevent any further losses.

For example, when President Donald Trump announced his Liberation Day tariffs on 2 April 2025, the Independent reports that £6.44 trillion was wiped off the value of the global stock market due to investors' selling off assets in fear of a further dip.

It’s easy to be swayed by media noise. However, if you react emotionally to news headlines and panic-sell your investments, this can instantly lock in your losses, which you may struggle to recoup over the course of your retirement.

3. Emotional cost

Alongside financial losses, market volatility can also intensify your stress in retirement.

Once you move from working income to retirement income, your finances are reliant, in part, on the stability of your portfolio.

Therefore, if market volatility causes your investments to destabilise, it can make you feel anxious, stressed and tense about the safety of your financial plan and livelihood in retirement.

Similarly, an anxious emotional state might also put you at greater risk of panic-selling your investments, which could compound your financial losses alongside the cost of market volatility on your mental health.

A Kellands financial planner can offer practical guidance and reassurance to help your retirement plans stay on track

It’s easy to feel overwhelmed by the fear of market volatility, especially when it seems like your retirement is at risk.

Seeking out professional guidance can help you find reassurance about your financial future.

For example, our financial planners can help you ease sequencing risk by creating a stable portfolio made up of diversified asset classes across different markets and geographical regions. This means that if one market dips, another might rise, keeping your portfolio and withdrawals more secure.

You can also seek out professional advice during periods of volatility to help you make careful and informed decisions regarding market downturns, rather than reacting to media noise.

Similarly, if you are feeling anxious about the security of your retirement finances, your financial planner can use cashflow planning to map out your financial future and help you find peace of mind.

If you’d like to find out more about what our award-winning team at Kellands can do for your retirement plans, get in touch today.

Email us at hale@kelland.co.uk or call 0161 929 8838.