If you’re approaching retirement and feeling unsure about investing when you’re nervous about the stock market, you’re not alone. In this episode of the Wise Money Show, we tackle a real question from a soon-to-be retiree who wants growth but is afraid of losing money. The team explains why your investment strategy should start with a retirement plan, not a stock pick, and how your income sources, risk tolerance, and long-term goals all work together. Learn how to determine the right level of risk for your situation and avoid letting fear or FOMO drive your investment decisions.
Season 11, Episode 29
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This information is for general financial education and is not intended to provide specific investment advice or recommendations. All investing and investment strategies involve risk, including the potential loss of principal. Asset allocation & diversification do not ensure a profit or prevent a loss in a declining market. Past performance is not a guarantee of future results.
Investing When You’re Nervous About the Stock Market: What Should You Do Before Retirement?
If you’re approaching retirement and feel nervous about investing in the stock market, you’re not alone. Many soon-to-be retirees worry about losing money right when they’ll need it most. After decades of saving, the thought of a market downturn can feel overwhelming.
But the truth is that the answer to this question isn’t found in a stock tip, a YouTube video about the S&P 500, or a simple rule like “own stocks and treasuries.” The right investment strategy starts with something far more important: a retirement plan.
Before deciding how to invest your money, you need to understand what your money actually needs to do for you.
Start With a Retirement Plan, Not an Investment
One of the most common mistakes retirees make is starting with the investment decision instead of the retirement plan.
Many people ask questions like:
- Should I invest in the S&P 500?
- Should I buy treasuries or bonds?
- Should I move everything to something safe?
But those questions skip the most important step. Your investments should be guided by your retirement goals.
At Korhorn Financial Group, we often talk about building a five-factor retirement plan, which looks at five critical areas:
- Your retirement age
- Your expected spending
- Your income sources (Social Security, pensions, etc.)
- Your savings and investments
- Your risk tolerance
Only after you understand how these five factors interact should you determine how your portfolio should be invested.
Guaranteed Income Changes Everything
One of the most important factors in retirement planning is how much guaranteed income you have.
Guaranteed income can include:
- Social Security
- Pensions
- Annuity payments
- Other predictable income streams
If those income sources cover your core living expenses, it changes your investment strategy dramatically.
For example, imagine you have $4,500 per month coming in from Social Security and a pension, and that amount covers your lifestyle. In that situation, your investments may not need to generate a large amount of income right away.
That flexibility allows you to choose an investment strategy that fits your emotional comfort level rather than forcing you to chase higher returns.
In other words, strong income sources can reduce the pressure on your investments.
Understanding the Different Types of Risk
When people say they’re afraid of the stock market, they’re usually talking about emotional risk. This is the stress or anxiety caused by watching your investments go up and down.
But there are actually several types of risk to consider:
Emotional Risk
Can you emotionally handle market volatility? If seeing your portfolio drop causes sleepless nights, that matters.
Financial Risk
How much risk do you actually need to take to meet your retirement goals?
Longevity Risk
Will your money last for the rest of your life?
Sometimes people focus only on avoiding short-term losses and forget about long-term risks like inflation or running out of money.
Taking too little risk can be just as dangerous as taking too much.
Are You a Saver or an Investor?
Another important concept is understanding your financial personality.
There are generally three types of market participants:
Traders
Traders buy and sell frequently, trying to profit from short-term market movements.
Investors
Investors focus on long-term growth and accept short-term volatility as part of the process.
Savers
Savers prioritize stability and preservation of capital.
Problems often occur when someone who is naturally a saver tries to act like an investor because they don’t want to miss out on market returns.
If that mismatch exists, every market downturn can feel like a crisis.
The key is being honest with yourself about your comfort level.
The Danger of Fear and FOMO
Two powerful emotions often drive poor investment decisions:
Fear of losing money
This can cause people to avoid investing altogether.
Fear of missing out (FOMO)
This can push people into investments that feel too risky.
Both emotions can lead to bad outcomes if they drive your decisions instead of your financial plan.
Your strategy should be based on your personal goals and financial situation, not what the market did last year or what someone on television is recommending.
Conservative Strategies Can Still Work
If your retirement plan shows that you don’t need aggressive growth, a more conservative investment approach may be appropriate.
That could include strategies like:
- High-quality bonds or treasuries
- Conservative diversified portfolios
- Investments with downside protection strategies
- A mix of income-focused assets
There is no universal “correct” portfolio for retirement. The right strategy is the one that supports your goals while allowing you to sleep at night.
Don’t Walk This Road Alone
Retirement decisions can feel overwhelming, especially after losing a spouse or transitioning into a new stage of life.
Working with a Certified Financial Planner™ professional can help provide two things many retirees are missing:
Clarity and confidence.
A good financial planner isn’t just picking investments. They help you:
- Build a comprehensive retirement plan
- Understand how your income and investments work together
- Identify the right level of risk
- Avoid emotional decision-making
Sometimes the greatest value of financial advice isn’t a specific investment recommendation. It’s having a trusted thinking partner who helps you see the full picture.
The Bottom Line
If you’re approaching retirement and nervous about the stock market, the solution isn’t simply choosing safer investments.
The real solution is building a plan that answers these questions:
- How much income will you need?
- What income sources do you already have?
- How hard do your investments need to work?
- What level of risk are you comfortable with?
Once those answers are clear, the investment strategy becomes much easier.
And most importantly, you’ll move into retirement with something far more valuable than a hot stock tip.
You’ll have a plan.
