Market Corrections, Recession, and Retirement: How to Safeguard Your 401(k) with Guarantees

How to Protect Your Retirement

The recent market correction has once again reminded investors that the stock market is unpredictable. If you're close to retirement—within 10 to 15 years—these downturns aren’t just numbers on a screen. They can have real consequences on your retirement plans.

Market corrections (a drop of 10% or more) and recessions (a prolonged economic slowdown) can devastate retirement accounts, particularly 401(k)s heavily invested in stocks. But there’s good news: guaranteed income strategies, like lifetime income annuities, can help protect your retirement savings.

1. Market Corrections and Recession: A Dangerous Combination for Retirees

For those nearing retirement, market downturns aren’t just temporary setbacks—they can permanently reduce retirement income. Here’s how:

🚨 The Sequence of Returns Risk

When you're withdrawing money from a shrinking 401(k) during a downturn, you lock in losses and reduce the long-term value of your savings. This is called sequence of returns risk, and it can significantly shorten how long your money lasts.

For example, two retirees can have the same average market return over 30 years, but if one experiences a market crash early in retirement, their savings could run out decades earlier than the other.

🚨 Your 401(k) is NOT Guaranteed

Most 401(k)s are market-dependent, meaning your future retirement income is uncertain. While the stock market historically recovers, a major recession could take years to bounce back—time you may not have if you're close to retiring.

🚨 Inflation and the Cost of Living

During a recession, inflation can continue to eat away at your purchasing power. If your retirement savings shrink while prices continue to rise, you may outlive your money or be forced to adjust your lifestyle significantly.

2. The Role of Guarantees: How a Lifetime Income Annuity Can Help

If you're concerned about market volatility, recession risks, and running out of money, a lifetime income annuity can provide peace of mind. Unlike a traditional 401(k), which depends on market performance, annuities offer:

✅ Guaranteed Lifetime Income

A lifetime income annuity converts a portion of your savings into a steady paycheck for life, no matter how the market performs. This means you'll never run out of money, even in a recession.

✅ Protection from Market Losses

Once you purchase an annuity, it is not affected by market downturns. Your income remains stable, giving you financial security even during recessions or stock market crashes.

✅ Supplementing Your 401(k) & Social Security

Instead of relying solely on market-driven 401(k) withdrawals, you can use an annuity to create a "retirement paycheck." This ensures that, no matter what happens in the economy, your essential expenses are covered.

✅ More Control Over Your Retirement Plan

With an annuity, you can choose how and when you receive your payments—monthly, quarterly, or annually—giving you flexibility in managing your retirement income.

3. The Best Strategy? Balance Growth and Guarantees

If you're close to retirement, the best approach is to protect a portion of your savings while still allowing some growth. Here’s a balanced strategy:

🔹 Keep some assets in stocks for growth, but gradually shift toward lower-risk investments.

🔹 Use a lifetime income annuity to cover essential expenses like housing, healthcare, and daily living costs.

🔹 Have emergency funds and inflation-protected assets to maintain purchasing power.

By blending market investments with guaranteed income, you reduce risk while ensuring financial security.

4. The Bottom Line: Don't Leave Your Retirement to Chance

If you’re retiring in the next 10 to 15 years, now is the time to secure guaranteed income that lasts a lifetime. Market corrections and recessions will come and go—but your financial security shouldn’t be at risk.

A lifetime income annuity can be a powerful tool to protect your retirement savings from market volatility, provide a reliable paycheck, and give you peace of mind.

👉 Are you prepared for the next market downturn? Let’s discuss how to safeguard your retirement today. Schedule a free consultation.