Retirement can be stressful even when your investments are doing well. Volatile markets can turn what was low-level background anxiety into a recipe for sleepless nights. You’re worried about draining your savings too quickly, but you also need to sell investments to pay your bills.

How well you navigate a situation like this, especially in the early days of your retirement, depends a lot on your withdrawal strategy. There’s no best option, but there’s one mistake that will almost certainly cost you.

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Flexibility is key

You don’t want a rigid retirement withdrawal strategy when market volatility enters the picture. You want a plan that can adapt to the situation and help you stretch your savings out over the remainder of your life.

Sticking to a strict schedule can feel easier in the moment. But if you follow the 4% rule rigidly, for example, you might withdraw more than is wise while your investments are down. This will leave you with fewer investments to cover your future expenses, which can cause you to run out of money too quickly.

You might be better off reducing your spending somewhat when your investments are down. For example, maybe withdraw just 3% or 3.5% instead of 4% for a while. Once your investments recover, you could increase your withdrawal rate again if that’s what’s best for you.

Consider using a bucket strategy, too

The bucket strategy for retirement savings involves investing money across different time horizons in different ways. Money you don’t expect to touch for 10 years or more stays invested, so it can continue to grow until you need it.

Savings you plan to spend in the next three to 10 years go into low-risk investments, like certificates of deposit (CDs) or money market accounts. This way, your money still grows a little bit, and you’re not in danger of huge losses.

Money you expect to use in the next one to two years stays liquid. A high-yield savings account is a good choice for this. This keeps your money accessible. It also buys you some flexibility in terms of when you sell your investments.

If your investments are down, but you already have one or two years of savings in cash, you can afford to wait a little while for your investments to rebound before you sell any of your stocks. That could be just what you need to ease your worries about covering your costs in the near term.

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