The stock market experienced significant volatility last week, with the S&P 500 dropping nearly 5% on Thursday and an additional 6% on Friday. This has raised concerns among individuals nearing retirement or who have recently retired, as they find themselves in a precarious financial position. Financial experts advise those close to retirement to mitigate risks during the five years before and after retirement, often referred to as the retirement danger zone.
They recommend five proactive steps to reduce risk during these volatile times, including building a cash cushion to cover expenses without needing to liquidate investments during a downturn. Americans nearing retirement and recent retirees express anxiety and frustration after the market turmoil caused significant hits to their 401(k)s. Paula, a 68-year-old former occupational health professional in New Jersey who retired three years ago, said, “I’m just kind of stunned, and with so much money in the market, we just sort of have to hope we have enough time to recover.”
President Trump fulfilled his campaign promise to impose sweeping tariffs, including on the United States’ largest trading partners.
The decision sent the stock market spinning, with the broad-based S&P 500 closing down 6%, the tech-heavy Nasdaq dropping 5.8%, and the Dow Jones Industrial Average falling more than 2,200 points, or roughly 5.5%. China retaliated with tariffs of its own, causing millions of Americans with 401(k)s to watch their retirement funds dwindle. Victor Fettes, 54, of Georgia, who retired last week as a senior director of risk management and compliance at Verizon, said, “I looked at my 401(k) this morning and in the last two days it has lost $58,000.
That’s stressful.
Market volatility impacts retirement plans
If that continues, I can’t stay retired.”
Some Americans planning retirement feel their economic stability is being compromised.
Alison Carey, 64, of Oregon, a freelancer in the theater industry, said, “I don’t want to have to worry that everyone is constantly changing my financial reality. Let the economy do its machinations, but don’t put me in the gears.”
Statistics show one in five Americans age 50 and over has no retirement savings, and more than half, 61%, are worried they won’t have enough money to support themselves in retirement. Paula and her husband have decided to pause big-ticket purchases and reduce spending on vacations and home renovations due to the uncertain financial future.
The global stock market has lost trillions in value since Trump announced sweeping new 10% import taxes on goods from every country, with products from key trading partners such as China, the European Union, and Vietnam facing far higher rates. Analysts expect the measures to lead to a contraction in trade and have warned they could drive many countries into an economic recession. JP Morgan now puts the odds of a global economic recession this year at 60%, up from 40% previously, noting that the shock from the tariffs could drive growth in the US down by two percentage points this year.
The market turmoil has affected businesses across various sectors, with some small business owners like Pat Muscaritolo of Jacobson Appliance in New Jersey considering shutting down after 40 years in business due to the uncertainty in prices. As the rout continued, even some White House allies started to criticize the measures. Republican Senator Ted Cruz of Texas warned of “enormous risks” if the scenario persists with massive American tariffs and massive tariffs on American goods in every other country on earth.