3 Stock Market Fears Future Retirees Face — and Smart Ways To Handle Them

Most Americans feel reasonably confident about retirement, even in a shaky economy. A new Betterment at Work report found that 79% of employees are at least somewhat confident in their understanding of retirement planning, and 71% feel at least somewhat confident they will be able to save enough for retirement. Yet the report shows that many still worry about how stock market swings could derail their plans — especially as they approach retirement.

Here are American workers’ top retirement fears related to the stock market, plus expert tips on how to address them.

Fear 1: A Stock Market Crash Right Before Retirement

Over half of U.S. workers (58%) fear that a major crash will happen right before they plan to retire.

“The fact that 58% of workers fear a last-minute crash is actually pretty reasonable,” said Mindy Yu, senior director of investing at Betterment at Work. “This is what’s known as ‘sequence of returns risk’ — the danger that the market drops sharply right when you need to start withdrawing funds.”

If the market falls 20% the year you retire and you’re forced to sell stocks to pay your bills, you’re effectively locking in those losses and potentially shortening your portfolio’s lifespan by years. Despite this risk, there are ways to protect yourself.

“The best way to shield yourself is by building a liquidity buffer or cash sleeve by keeping a few years of essential living expenses in a high-yield cash account or short-term bonds,” Yu said. “This acts as both a financial and psychological safety net; if the market crashes, you can draw from your cash instead of selling stocks at a loss, giving your portfolio time to recover.”

This crash-at-the-wrong-time scenario is scary — but it’s manageable with the right planning.

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Fear 2: The Market Won’t Deliver Enough Long-Term Returns

The next most common fear (50%) is that the market won’t generate high enough returns over the long term to fund a retirement. The best way to address this fear is through diversification.

“A well-diversified portfolio across asset classes, like stocks and bonds, and across regions, including both U.S. and international markets, can help manage risk and improve the consistency of returns over time,” Yu said. “Diversification can be especially important if markets underperform, because different assets may respond differently to economic conditions.”

Yu also recommended shifting your allocation over time.

“As you near retirement, transitioning to a more conservative allocation through a glide path that gradually increases your bond exposure can help reduce risk,” she said. “Bonds, particularly those that offer higher yields or are designed to keep pace with inflation, can provide a more stable income stream and help preserve your purchasing power.”

It’s also essential to plan for flexibility.

“Even in years when returns are lower, a thoughtfully constructed retirement portfolio that focuses on diversification and adjusted risk can help you manage withdrawals and maintain income over time,” Yu said.

For those concerned about income generation, she recommended using a portion of your portfolio to purchase a simple, low-cost annuity.

“If you can cover essential expenses — utilities, food, taxes — with guaranteed income, you reduce the pressure on your remaining investments to perform every year,” Yu said. “In turn, this allows the rest of your portfolio to stay invested for long-term growth, giving it the time and flexibility it needs to eventually catch a tailwind.”

Importantly, you should review your portfolio exposures on a regular basis to ensure that you are aligned with your retirement goals and are maintaining appropriate risk.

Fear 3: Missing Growth by Playing It Too Safe

Roughly one-third of U.S. employees (34%) fear not taking enough risk and missing out on potential growth.

“At its core, investing is a trade-off: Your potential returns are proportional to the amount of risk you’re willing to take,” Yu said. “The goal is to find a middle ground that balances long-term growth and security. In other words, a ‘Goldilocks’ level of risk — not so aggressive that it leads to panic during a crash, and not so conservative that inflation erodes your purchasing power.”

Finding your “just right” level requires understanding the difference between risk tolerance and risk capacity.

“Risk tolerance is emotional — how you feel and behave when the market drops,” Yu said. “Risk capacity is financial — how much risk your plan can realistically take on and still reach your goals.”

To ensure you’re hitting the right level of risk, Yu recommended using an objective, goal-based risk assessment that ties your portfolio risk directly to your time horizon, income needs and financial targets.

“One of the most effective ways to calibrate this over time is an automated glide path, which will gradually shift your allocation from growth-heavy stocks to more stable assets as you approach retirement,” she said.

“Early on, it helps you capture the higher growth you need; as you near your ‘red line’ — your retirement date — it automatically applies the brakes, so you’re not constantly worrying whether you’re taking the ‘right’ amount of risk.”

Retirement always involves uncertainty, but understanding your risks — and adjusting your plan as you get closer — can give you more control. With a diversified portfolio, a sensible risk level and a solid income strategy, you’ll be better positioned to weather market swings and stay on track.

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