The Biggest Risk to Retirement Isn't Market Volatility

Why confidence, planning, and discipline matter when headlines feel uncertain

Headlines Can Make Risk Feel Immediate

When global events dominate the news, it is natural for investors to feel uneasy. Conflicts, elections, inflation, interest rates, and economic uncertainty can all make markets feel unpredictable.

For many retirees and pre-retirees, the concern is not only what is happening in the world. The deeper concern is often personal:

“Will my retirement plan still work if markets become difficult?”

That is a valid question. But it is also important to separate market volatility from the larger risks that can affect retirement confidence over time.

Market volatility is uncomfortable, but it is not always the greatest risk to a retirement plan.

Risk Management Is Not Prediction

Successful retirement planning is not built on predicting the next conflict, election result, interest rate move, or market correction.

No one can consistently predict headlines or short-term market reactions. A stronger approach is to build a plan that can withstand uncertainty before uncertainty arrives.

That means focusing on what can be managed, reviewed, and adjusted:

• Asset allocation
• Diversification
• Cash flow planning
• Withdrawal strategy
• Tax efficiency
• Time horizon
• Spending flexibility
• Emotional decision-making

Risk management is not about knowing exactly what will happen. It is about having a disciplined process for what to do when conditions change.

The Risk of Not Having an Income Plan

One of the biggest risks in retirement is not knowing where income will come from each year.

When income is unclear, market volatility feels more threatening. A short-term decline can create pressure to sell investments at the wrong time or make emotional decisions based on fear.

A retirement income plan should help answer:

• How much income is needed?
• Which accounts should income come from first?
• How much cash or liquidity should be available?
• How will income needs change over time?
• What happens if markets are weak during the early years of retirement?

When retirees understand the income plan, market headlines often become easier to keep in perspective.

The Risk of Emotional Decisions

Periods of uncertainty can tempt investors to make major changes quickly. The desire to do something is understandable. But decisions made during periods of fear can create long-term consequences.

Emotional investing may show up as:

• Moving too much to cash after markets decline
• Abandoning a diversified portfolio
• Chasing whatever performed well most recently
• Changing strategy based on headlines rather than goals
• Taking more or less risk than the plan originally intended

A good plan does not remove emotion, but it can create a framework for making decisions more calmly.

The Risk of Inflation

Inflation can quietly affect retirement over time. Even if income feels sufficient today, rising costs can reduce purchasing power over a long retirement. This matters because many retirements may last 20, 25, or 30 years or more.

Inflation risk is one reason many retirees still need some form of long-term growth in their portfolios. A plan that feels safe in the short term may still need to support spending needs far into the future.

The goal is balance: enough stability to support current income needs, and enough growth potential to help preserve purchasing power over time.

The Risk of Poor Diversification

Concentration can increase risk. A portfolio that depends too heavily on one company, sector, country, asset type, or investment theme may be more vulnerable when conditions change.

Diversification does not guarantee gains or prevent losses, but it can help reduce reliance on a single outcome.

A diversified approach may consider:

• Different asset classes
• Different geographies
• Different sectors
• Different income sources
• Different time horizons for different needs

The purpose of diversification is not to own everything. The purpose is to avoid having the entire plan depend on one version of the future.

The Risk of Ignoring Taxes

Retirement income is not only about how much money comes in. It is also about how much money remains after tax.

Different sources of retirement income may be taxed differently. RRSP and RRIF withdrawals, pension income, non-registered investment income, capital gains, CPP, OAS, and TFSA withdrawals can all affect cash flow in different ways.

A withdrawal strategy should consider whether income can be coordinated more efficiently over time. This is especially important when markets are volatile and retirees are deciding which accounts to draw from.

Tax planning should be coordinated with qualified tax professionals, but it should also be part of the overall retirement conversation.

The Risk of Never Reviewing the Plan

A retirement plan is not a one-time document. Life changes. Markets change. Tax rules change. Family needs change. Spending patterns change.

A plan that made sense five years ago may still be appropriate, but it should be reviewed.

Regular reviews can help identify:

• Whether spending remains sustainable
• Whether portfolio risk is still appropriate
• Whether cash reserves are sufficient
• Whether tax planning opportunities should be discussed
• Whether estate or beneficiary plans need attention
• Whether market volatility requires action or patience

A review does not always mean making changes. Sometimes the most valuable outcome is confirming that the plan still makes sense.

What Investors Can Control

Investors cannot control global events, political decisions, central bank actions, or short-term market reactions.

But investors can control many parts of the retirement planning process:

• Having a written retirement income plan
• Keeping appropriate cash reserves
• Maintaining diversification
• Reviewing risk tolerance regularly
• Coordinating withdrawals and tax considerations
• Avoiding emotional decisions
• Rebalancing when appropriate
• Reviewing the plan after major life changes

Focusing on what can be controlled helps investors avoid letting headlines control the plan.

Final Thoughts

The biggest risk to retirement is not always market volatility itself. Often, the bigger risk is not having a plan for how to respond to volatility.

A strong retirement plan should help answer three questions:

• Where will my income come from?
• What risks could affect my retirement?
• What should I do when markets or life circumstances change?

Global uncertainty will always be part of investing. The goal is not to eliminate uncertainty. The goal is to build a plan that helps you make thoughtful decisions through uncertainty.

When the plan is clear, headlines become less powerful.

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Disclaimer

This information, including any opinion, is based on various sources believed to be reliable, but its accuracy cannot be guaranteed and is subject to change.

CIBC Private Wealth consists of services provided by CIBC and certain of its subsidiaries through CIBC Private Banking; CIBC Private Investment Counsel, a division of CIBC Asset Management Inc. (CAMI); CIBC Trust Corporation; and CIBC Wood Gundy, a division of CIBC World Markets Inc. (WMI). CIBC Private Banking provides solutions from CIBC Investor Services Inc. (ISI), CIBC Global Asset Management and credit products. CIBC Private Wealth services are available to qualified individuals. The CIBC logo, “CIBC Private Wealth”, “CIBC Private Banking” and “CIBC Global Asset Management” are trademarks of CIBC, used under license. “Wood Gundy” is a registered trademark of CIBC World Markets Inc. Insurance services are only available through CIBC Wood Gundy Financial Services Inc. In Quebec, insurance services are only available through CIBC Wood Gundy Financial Services (Quebec) Inc.

Robert Van Alphen is an Investment Advisor with CIBC Wood Gundy in Penticton. The views of Robert Van Alphen do not necessarily reflect those of CIBC World Markets Inc.

If you are currently a CIBC Wood Gundy client, please contact your Investment Advisor.