Retiring amid uncertainty? Here’s what to consider

There are many, given how unpredictable life can be. Some of the primary ones are longevity, adverse health events, and market volatility. Broader factors related to geopolitics, trade policy, Social Security, and taxes can add to the complexity. Recognizing that these uncertainties exist helps investors develop a flexible and measured response rather than reacting in a moment of panic.

Just because there are wild cards in the deck doesn’t mean there’s nothing investors can do. In fact, it underscores the importance of anticipating those bumps along the retirement journey—and being willing to adapt as circumstances change. 

Think of retirement planning as you would piloting a plane: A pilot may adjust course to avoid turbulence or land at an alternate airport. Similarly, investors can revise their plans in response to these uncertainties. That’s the power of flexibility: adjusting your route in those pivotal moments without losing sight of your destination.  

Our Vanguard Retirement Outlook finds that a typical person may need to replace about 70% of annual working income in retirement. Approximately 40% of that amount will come from Social Security. That means there’s still a large portion—about 30%—that needs to be funded from one’s own savings. So, for those who are still working, it’s crucial that they take stock of their current financial situation. Do they have enough money to retire when and how they hoped? Will they meet their lifestyle expectations? Working a few more years to save more, if possible, can be an important lever when addressing a shortfall.

An investor can also consider these strategies:

• Maximize savings by taking full advantage of a 401(k) employer match. Almost all 401(k) plans administered by Vanguard offer a match, according to the 2025 edition of How America Saves.
  
  
• Use catch-up contributions. 401(k) participants age 50 or older can contribute an additional $7,500 through a catch-up provision. Starting this year, those ages 60 to 63 can contribute even more, up to $11,250, through an enhanced catch-up provision made available in the SECURE Act 2.0.
  
  
• Contribute to an employer-sponsored health savings account (HSA), if available. An HSA offers a triple tax benefit—deductions for contributions, tax-deferred growth on investments, and tax-free withdrawals for qualified medical expenses in retirement.¹ As health care costs continue to increase, an HSA can be a great way to fund those costs.
  
  
• Delay Social Security claiming. Benefits initiated before full retirement age will reduce the monthly payout, while postponing the start of benefits will increase the monthly payout. It may be easier for savers to delay Social Security when they also choose to work longer. 

Our research finds that many retirees lack a systematic approach to generating income in retirement. About half make withdrawals sporadically, a quarter do not touch their wealth until they’ve reached the age to take a required minimum distribution (RMD), and a quarter cash out altogether. These behaviors may create unintended and undesirable outcomes, such as unnecessarily restricting their lifestyle by delaying withdrawals until RMD and forgoing decades’ worth of potential investment gains by cashing out at retirement.

Building a more strategic approach to income generation—one that factors in the uncertainties we discussed earlier—is critical for retirees. And the first step is taking stock of all of an investor’s wealth sources. These include 401(k) accounts from multiple employers, IRAs, Roth accounts, taxable brokerage accounts, and anything else that could be used to fund retirement. A comprehensive view of these different pots of savings can help build a distribution strategy that determines how much to spend and reduces taxes.

The goal for retirees is to build a portfolio that lasts a lifetime. A flexible spending strategy, particularly in uncertain markets, can help preserve assets, especially during the earliest years of retirement. During a market downturn, a retiree may reduce spending. Instead of spending down 4% of assets, for example, the retiree could reduce spending to 2%–3%. When markets are up and portfolio balances are higher, investors may withdraw more. This adaptive approach can help sustain a portfolio’s value while not locking in losses.  

Market volatility can be unsettling for anyone, but especially for those in or near retirement. It’s important to note that downturns are a normal part of the economic cycle and that markets have recovered throughout history. We experienced this during the global financial crisis, the COVID-19 pandemic, and even earlier this year when U.S. tariff announcements shook equity and fixed income markets.

Market uncertainty offers investors a valuable opportunity to reexamine their tolerance for risk and, consequently, their long-term asset allocation strategy. Market downturns aren’t always shallow, and recoveries aren’t always swift. A well-diversified mix of equities and bonds can help lessen the effect of market movements while leaving space for the advantages of market upswings.