Retired or retiring soon and worried about falling markets?

If you're retired, or approaching retirement, you might be concerned about the recent turbulence in the stock market.

Watching your hard-earned savings fluctuate is stressful for anyone, but it’s especially worrying if you’re relying on your investments to fund your retirement.

The good news is there are several ways to help keep your retirement on track. In this article, we explore eight steps to consider.

1. Review your retirement goals

Some studies suggest that people need between 50% and 86% of their pre-retirement income to maintain the same standard of living in retirement as they had during their working life¹. But now might be the time to see if you can reduce some of your expenses. Take a moment to reassess your retirement income needs and ask yourself, what’s most important to my happiness? Create a budget and prioritise your costs to work out how much you really need in retirement.

2. Adopt a flexible spending strategy

Instead of withdrawing a fixed amount from your pension each year, you could consider a more flexible approach, where you adjust your withdrawals depending on how markets perform. You take more out when markets are doing well and less when they’re not. However, you do this within a predetermined range, so you never withdraw too much or too little. We call this strategy ‘dynamic spending’. It can help to protect your pension from market downturns while also ensuring you draw enough money to sustain your lifestyle.

3. Think about cash management

Rather than drawing a monthly income from your investments when markets are falling, another option is to place a year’s worth of money in a lower-risk money market fund and then draw income from that. This will mean you don’t have to rely on shares and bonds² during an uncertain period and risk locking in losses. A money market fund gives you a place to hold rather than grow your savings, while aiming to give you a slightly higher return than cash in a savings account. 

4. Put your costs on a more sustainable footing

There may be ways to cut back on your discretionary spending, such as cutting back on TV subscriptions or cancelling unused gym memberships. Make sure you’re also taking advantage of any concessionary fares or free public transport that may be available to you. And if you still have any debt, try to pay it off.

5. Downsize your home

If you’re a homeowner, moving to a smaller property or a property in a cheaper area can help in two ways:

• converting some of the equity in your home into cash could help raise extra money for your retirement

• if you reduce your running costs, you may be able to get by on a smaller income

Remember to factor in Stamp Duty, and other costs, when working out how much you could save.

6. Lean on other sources of income

The longer you leave your pension untouched, the more time it will have to recover from a weak market. So, think about whether you have other investments or assets that can provide income. Do you earn rental income or have cash savings? Are there items in your house that you could sell to raise some money? Online marketplaces make it easier than ever to sell unused or unwanted items. Do you still need two cars, or even one? How about taking in a lodger? There are several potential options that could help you buy more time.

7. Delay your retirement

If you’re planning to retire soon, you could consider holding off for a while. Keeping your pension invested will give it more time to recover from market dips. You’ll also have longer to keep contributing to your pension, benefit from tax relief and, if you’re employed, receive employer contributions.

If you’re retiring early – before State Pension age – delaying your retirement could be an even bigger consideration. This is because, until your State Pension starts, you won’t yet have that guaranteed income to fall back on. This may mean you need to rely more heavily on your workplace or personal pensions in the early years of retirement. The full State Pension is currently £12,548 a year.

Check your State Pension age and how much State Pension you could get

8. Return to work

If you’ve already retired, it might be worth considering going back to work for while, whether full-time, part-time or on a freelance basis, to help your pension savings stretch further. Bear in mind that if you’ve started drawing taxable income from your pension, you’ll trigger the money purchase annual allowance. This limits the amount you can pay into your pensions to £10,000 each tax year (including tax relief and employer contributions).

While a fall in value of your pension is understandably unsettling, these eight practical steps – from revisiting your goals and spending plan to reducing costs and delaying retirement – can help keep your finances on track while you ride out market turbulence.
 

¹ The rates were set by the Pensions Commission in 2004 and updated by the Resolution Foundation in 2024. They vary by gross earnings and range from 50% for those earning over £74,600 to 86% for those earning less than £17,000. Sources: Pensions: Challenges and Choices. The First Report of the Pensions Commission, Pensions Commission, 2004. Broome and Mulheirn. Perfectly adequate? Resolution Foundation, 2024.

² Bonds are a type of loan issued by governments or companies, which typically pay a fixed amount of interest and return the capital at the end of the term.
 

Investment risk information

The value of investments, and the income from them, may fall or rise and investors may get back less than they invested.

Eligibility to invest in a Vanguard Personal Pension depends on your individual circumstances. Please be aware that pension and tax rules may change in the future and the value of investments can go down as well as up, so you might get back less than you invested. You cannot usually access your pension savings or make any withdrawals until the age of 55, rising to the age of 57 in 2028.

If you are not sure of the suitability or appropriateness of any investment, product or service you should consult an authorised financial adviser. Please note this may incur a charge.

Any tax reliefs referred to are those available under current legislation, which may change, and their availability and value will depend on your individual circumstances. If you have questions relating to your specific tax situation, please contact your tax adviser.

An investment in a money market fund is not a guaranteed investment. An investment in a money market fund is different from an investment in deposits, as the amount invested in a money market fund is capable of fluctuation. Money market funds do not rely on external support for guaranteeing the liquidity of the money market fund or stabilising the Net Asset Value per share. The risk of loss of the amount invested shall be borne by the investor.

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Vanguard only gives information on products and services and does not give investment advice based on individual circumstances. If you have any questions related to your investment decision or the suitability or appropriateness for you of the product[s] described, please contact your financial adviser.

This is designed for use by, and is directed only at, persons resident in the UK.

The information contained herein is not to be regarded as an offer to buy or sell or the solicitation of any offer to buy or sell securities in any jurisdiction where such an offer or solicitation is against the law, or to anyone to whom it is unlawful to make such an offer or solicitation, or if the person making the offer or solicitation is not qualified to do so. The information is general in nature and does not constitute legal, tax, or investment advice. Potential investors are urged to consult their professional advisers on the implications of making an investment in, holding or disposing of shares and /or units of, and the receipt of distribution from any investment.

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