What should retired people do during market downturns?

With proper planning and a balanced approach, Indian retirees can maintain their lifestyle and financial security even during challenging market conditions, expert says

For retirees a market downturn can be a stressful period, especially if their savings and investments are tied up in stocks, mutual funds, or other market-linked instruments. The volatility of financial markets can lead to reduced portfolio values, impacting their retirement corpus. However, with prudent financial planning and disciplined strategies, retirees can navigate these downturns without compromising their financial well-being.

 

Nilesh D Naik, Head of Investment Products, Share.Market (PhonePe Wealth) explains effective strategies that may help retired individuals navigate market downturns effectively.

 

Maintain a liquidity buffer: Retirees should keep at least two to three years of living expenses in liquid assets such as fixed deposits, Senior Citizen Saving Scheme, or short-term debt mutual funds. Having such liquidity can help avoid selling off the equity investment at lower levels during a market downturn.

 

 

Adjust withdrawal rates: Reducing the withdrawals by 10-15 per cent during the downturn can also help retirees to avoid dipping into their equity investments during such downturns, thus allowing equity investments a longer period to recover from market corrections.

 

Rebalance investment portfolios: Retirees should also periodically review their asset allocation to ensure that there’s sufficient liquidity in the portfolio to meet living expenses for at least two to three years and also ensure that the asset allocation in the rest of the portfolio is aligned with their risk tolerance to withstand short term volatility. Equity allocation should always be made with a long-term view and most retirees will also be better off maintaining a significant large cap tilt in their equity allocation.

 

“While market downturns can be concerning, historical data shows that Indian markets have consistently recovered over time. The key is to focus on long-term financial security rather than short-term market movements. With proper planning and a balanced approach, Indian retirees can maintain their lifestyle and financial security even during challenging market conditions,” an expert said.