Retiring into a downturn? 3 ideas to help manage income needs
Adding some stability to your cash flow could help you weather unpredictable economic and market changes
Early 2025 offered more proof that volatility is an unavoidable part of investing. The good news is that markets, historically, recover fully and continue to grow.Footnote 1
Yet for those eyeing retirement, an extended slump could have more serious consequences. "What might feel like a blip for a younger investor could do lasting damage to a portfolio of someone starting to use their savings and sell investments when values are low," says Anil Suri, head of Asset Allocation and Portfolio Construction for the Chief Investment Office, Merrill and Bank of America Private Bank.
The risk of an early bear market
When you're drawing money from your retirement accounts, a down market in the first few years can be devastating.
Note: For illustrative purposes only. They do not reflect the return of any particular investment. Investment returns will vary. This is not based on actual performance. Assumes 50% stock/50% bond portfolio, 5.1% average annual returns and $50,000 annual distributions. In the case of the down market initially, the market fell 22% in the first year, 8% in the second and 6% in the third. In the case of the down market at the end, the declines were 6% in the eighth year, 8% in the ninth year and 22% in the tenth. In both scenarios, the market rose in all other years. Source: "Investing for Retirement," Bank of America, Chief Investment Office, November 2025.
"While extended downturns are infrequent, the timing is unpredictable," Suri says. "So, it's important to plan for that possibility." First, it's important to project your income needs for necessities, lifestyle, healthcare and other costs, as well as your expected income from sources like Social Security, a pension and investments. If you work with an advisor, they can help you with this. Next, you can consider ways to plan for income in retirement that make up for potential shortfalls, whatever economic conditions arise. Here are three ideas to review:
1. Postpone Social Security
It's tempting to start Social Security at 62 (the earliest age you're eligible), but holding off could ensure a higher income stream for a long retirement.
Positives: Waiting until
the full retirement age of 66 (67 for those born 1960 or after) or beyond could boost your monthly benefit by about one-third, Suri
says.Footnote 2 Of course, much depends on your current cash flow and income needs. Among the risks: Delaying Social Security could work against you if meeting regular or unexpected expenses means you must sell investment assets with long-term growth potential. "This is a deeply personal choice," Suri adds. "But if you can make it work, waiting may be a good option."
2. Consider investing in a portfolio designed for retirement income
Portfolios specially designed for people in or near retirement may remove some guesswork from investing by managing risks while still pursuing long-term growth, Suri says.
Positives: "Based on your personal goals and
risk tolerance, you can choose a portfolio that's more aggressive or conservative," Suri says. "Either way, these portfolios aim to provide reliable income and help navigate from market volatility." Some portfolios also enable you to automatically move money from the portfolio into a bank account to meet your spending needs, he adds. But retirement income portfolios, like all investments, do contain risk. So be sure any portfolio you invest suits your risk tolerance and your overall retirement plan, Suri advises.
3. Invest strategically in bonds
While market volatility can affect the price of existing bonds, a more pressing concern for many investors in retirement is to receive steady, reliable bond income even as interest rates change, Suri notes. One strategy that could help is a
bond ladder, which involves owning individual bonds with different maturities.
Positives: You'll receive regular income and, as each level of bonds matures, you can reinvest the proceeds at current interest rates or put the funds to other uses. "Having part of your money in these assets could help ensure that, if a two- or three-year downturn occurs, you can weather it," Suri says. Despite their income potential, though, bonds typically can't match the long-term potential growth of stocks, he notes. So it's important to consider staying invested in stocks as well.
While these and other approaches could help stabilize your income picture, none is a complete answer on its own, he cautions. "Portfolio diversification, both across and within asset classes, is essential to weathering volatility," he says. An advisor can help you establish healthy income streams for a long retirement.
Footnote 1 Chief Investment Office, "Eyes on the Road Ahead," April 2025.
Footnote 2 Chief Investment Office calculations based on Social Security Administration data accessed November 2025.
Bond portfolio laddering does not reduce market risk, and the principal and yield of investment securities will fluctuate with changes in market conditions.
MAP8454552-05142027