Don’t let the Trump tariffs derail your retirement plan

The recent stock market volatility, triggered by escalating tariffs and trade tensions, has understandably rattled investors. But it’s important to remember that short-term geopolitical shocks and market fluctuations are a normal part of long-term investing.

They’re not rare or unexpected. They’re just part of the journey, and your retirement plan should be designed with these bumps in mind.

By taking a few key steps, you can stay resilient through market stress and keep your retirement plans on track.

It can be tempting to reduce risk dramatically when you retire. As humans, we’re naturally hard-wired to avoid pain (like seeing our investments fall in value). This can create a bias towards action, to do something to avoid or escape that pain.

But maintaining investment exposure is often essential for long-term sustainability. Stocks and shares, in particular, have historically helped outpace inflation and grow wealth over time, although there is always an element of risk and returns are not guaranteed.

As a result, many retirees will be well placed to remain invested in a well-diversified portfolio through retirement, one that includes a mix of equities, bonds, and alternative assets.

This gives you the flexibility to adjust income levels and respond to changing market conditions. However, this alone won’t shelter you from market movements.

One of the biggest risks to your retirement is not just how markets perform, but when. Sequencing risk refers to the danger that early losses in retirement, combined with withdrawals, can do lasting damage to your portfolio as you are selling down investments for withdrawals when prices have fallen.

For example, if markets fall in the early years of retirement and you’re withdrawing income at the same time, you could lock in those losses, reducing your capital base and limiting future recovery.

Mitigating sequencing risk means planning ahead. That could involve:

•    Keeping a cash buffer
•    Staying invested for long-term growth
•    Using a flexible withdrawal strategy that adjusts to market conditions

A cash buffer provides a safety net that can help you and your financial planner manage your assets through volatility and limit or avoid sequencing risk. To start with, financial advisors typically recommend holding around 6–12 months of essential spending in an emergency fund, along with up to two years of additional income shortfall in cash.

This buffer plays a crucial role in protecting your portfolio:

• Liquidity - cover unexpected costs without tapping into your investments
• Flexibility - pause or reduce pension withdrawals during market downturns
• Protection - avoid being a forced seller at the wrong time

This cushion provides peace of mind and can help preserve the long-term value of your portfolio.

A rigid, fixed-income approach can be risky during periods of volatility. Instead, consider a dynamic withdrawal strategy that adjusts based on market performance and your spending needs.

For instance, you might withdraw a set percentage of your portfolio each year, allowing for some flexibility. In years of strong market returns, you can afford to take more. In weaker years, drawing less can help give your investments time to recover.

Another example is the use of splitting your assets into a number of ‘pots’. Some earmarked for short term spending, others for capital expenses in the medium term (new cars, major holidays), and another for long term investment. Taking a different risk approach for each of these pots can avoid the need to sell down assets at the wrong time.

These approaches will not work for everyone, so it’s important to work with an adviser to define a sustainable withdrawal rate that fits your goals and circumstances.

While a cash buffer and an appropriate withdrawal strategy helps manage your retirement plan against volatility, it doesn’t impact how your invested assets weather the storm.

That’s why the right financial plan needs to work hand in hand with the right investment strategy, and here it’s a well-diversified portfolio which remains your best defence against volatility. Spreading your investments across asset classes, sectors, and regions can help reduce the impact of any single market shock, while comprehensive cashflow modelling can provide some certainty as to how market impacts could affect your retirement goals.

It’s also worth reviewing your asset allocation regularly, particularly as you approach or enter retirement.

Periods of uncertainty are when good financial planning shows its value. If you’re unsure whether your portfolio or withdrawal strategy is fit for the current climate, it’s a good time to speak with a professional.

At Evelyn Partners, we can help you build a resilient retirement plan that’s ready for whatever comes next, tariffs, trade wars, or otherwise.