How to Protect Your Retirement Income

Learn why protecting part of your retirement savings can become more important as you get closer to retirement.

6/15/2026

One of the greatest risks facing retirees isn't necessarily poor investment performance over the long term. In many cases, it's experiencing a significant market decline at exactly the wrong time.

When you're 30 years old and contributing to retirement accounts every month, a market correction may simply feel like a temporary setback. You still have decades to save, invest, and potentially benefit from future market recoveries.

Retirement can look very different.

As people transition from accumulating assets to relying on those assets for income, the timing of market losses can become far more important.

Why Market Losses Can Hurt More in Retirement

Many retirees spend years building substantial retirement savings only to discover that preserving those assets can be just as important as growing them.

A major market downturn early in retirement can create challenges that are often difficult to overcome. This is especially true when withdrawals are occurring at the same time account values are declining.

Financial professionals often refer to this as sequence of returns risk.

Sequence of returns risk describes the impact that the timing of investment returns can have on a retirement portfolio. Two retirees may earn the same average return over time, yet experience very different outcomes depending on when positive and negative market years occur.

For example, imagine two individuals each retire with $1,000,000 and begin taking income from their portfolio.

If one experiences strong market growth during the early years of retirement, their portfolio may have an opportunity to continue growing even while withdrawals occur.

If the other experiences several significant market declines during those same early years, withdrawals may accelerate the reduction of account value, making future recovery more difficult.

The average return may eventually be similar, but the outcome can be dramatically different.

This is one reason retirement planning often shifts from a growth-only mindset to a balance between growth, protection, and income.

The Lessons of 2008

Many investors still remember the financial crisis of 2008 and 2009.

During that period, stock markets experienced substantial declines, and many retirement accounts lost significant value. Some individuals delayed retirement, reduced spending plans, or adjusted their long-term financial goals as a result.

While markets eventually recovered, the experience highlighted an important reality: not everyone has the same amount of time to recover from a major loss.

For someone who is already retired or nearing retirement, a large decline can have a greater impact than it would for someone decades away from needing their money.

The Importance of Retirement Buckets

One strategy many retirees and pre-retirees use is often called the bucket approach.

Rather than viewing retirement assets as one large pool of money, assets may be allocated into different categories based on their intended purpose and time horizon.

A retirement bucket strategy may include:

• A growth bucket designed for long-term appreciation and future needs.

• An income and stability bucket designed to provide protection from market volatility.

• A cash or short-term bucket intended to cover upcoming expenses and liquidity needs.

The objective is not to eliminate market exposure. Instead, it is to create flexibility.

During periods of market volatility, retirees may have resources available outside of market-based investments, potentially reducing the need to sell growth assets at unfavorable times.

This approach can help support a more disciplined long-term strategy while providing greater confidence during uncertain markets.

Where Fixed Indexed Annuities May Fit

For some individuals, a fixed indexed annuity may serve as part of the protection-focused portion of a retirement plan.

Fixed indexed annuities are insurance products that provide growth opportunities tied to the performance of a market index while protecting principal from direct market losses due to market declines, subject to the claims-paying ability of the issuing insurance company and contract terms.

Because of this structure, some retirees use fixed indexed annuities to create a portion of their retirement strategy that is not directly exposed to stock market volatility.

For example, a retiree with $800,000 in retirement assets may choose to keep a portion invested for long-term growth while allocating another portion to a strategy focused on preservation and stability.

The goal is not necessarily to maximize returns. The goal is to create a retirement plan that aligns with the individual's risk tolerance, income needs, and long-term objectives.

Retirement Planning Is About Balance

One of the biggest misconceptions in retirement planning is that investors must choose between growth and safety.

In reality, many successful retirement strategies seek to balance both.

Growth remains important because retirement can last 20, 30, or even more years. At the same time, protecting a portion of retirement savings from significant market declines may help support income needs and provide greater financial confidence.

The closer retirement gets, the more important this balance often becomes.

A Thoughtful Plan Can Make a Difference

No single strategy is right for everyone.

The appropriate approach depends on factors such as age, retirement timeline, income needs, risk tolerance, existing assets, and overall financial goals.

Understanding the risks that can impact retirement—including market volatility and sequence of returns risk—can help individuals make more informed decisions about how their savings are positioned.

For many retirees and pre-retirees, the conversation is no longer just about growing assets. It's about creating a strategy designed to help protect what they've spent decades building while supporting the retirement lifestyle they envision.

This content is for educational purposes only and is not intended as financial, tax, or legal advice.

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