Key Points
- Two-thirds of financial advisors are changing their retirement advice due to economic uncertainty.
- Advisors are increasingly concerned about “sequence risk”—the danger of retiring into a down market.
- A key new strategy is creating cash “safe buckets” to cover 1-3 years of expenses, avoiding selling low.
- Many advisors now suggest phased retirement or part-time work to create a more stable income bridge.
A volatile stock market and a cloudy economic forecast are forcing financial advisors to ditch old-school retirement advice. According to a new report from the Alliance for Lifetime Income, two-thirds of advisors are now changing the strategies they recommend to clients who are nearing or in retirement.
“Rising inflation, uncertainty around Social Security and Medicare, and overall cost-of-living concerns have led us to adjust,” said certified financial planner Nathan Sebesta. He added that for many, the new reality means “rethinking retirement altogether.”
Instead of a hard stop to working, advisors are now encouraging clients to consider phased retirement or part-time work to provide a stable income stream and delay drawing down their savings.
A major focus of these new conversations is “sequence risk.” This is the bad luck of having a market downturn just as you start withdrawing from your retirement accounts. Pulling money out of a shrinking portfolio can permanently damage your nest egg. To fight this, advisors are pushing clients to build “safe buckets”—cash reserves that hold one to three years of living expenses. This buffer allows retirees to avoid selling stocks at a loss during a down market.
Beyond cash, advisors are also guiding clients toward other tools to create stability. Annuities, which provide a guaranteed stream of income, are gaining popularity.
Planners are also looking beyond traditional stocks and bonds to alternatives like private real estate and private credit, hoping to find diversification and growth in less volatile areas. The one-size-fits-all approach to retirement planning is fading fast, replaced by more flexible and cautious strategies.
