Why Managing Volatility is Even More Critical for Retirees

_{Posted on Feb 10, 2022}

When saving and investing over long periods of time, the sequence of returns makes no difference—ending wealth reflects the long-term average of lifetime returns.

When saving and investing for retirement, the returns experienced just prior to, during and just after the transition into retirement are particularly important because a retiree is shifting from positive cash flows (savings) to negative ones (spending). During these years, market conditions can have a significant effect on the viability of a retirement plan and the value of the estate that will be passed on.

A key risk that retirees potentially face is the risk of experiencing poor market returns early in retirement, when wealth is typically at its peak. At the same time, strong market performance during this period can act as a tailwind, making retirement funding much easier.

For this reason, managing volatility early in retirement is critically important. This can be done through diversification strategies, as well as through investment solutions that provide some downside protection. As seen from the chart, negative returns early in retirement can deliver lasting change to a portfolio when compared with a portfolio that suffers negative returns late in retirement – even when the average return over the entire span of retirement is the same for both portfolios.

Source: J.P. Morgan Asset Management. The original Retirement Insights paper is titled "Timing retirement – A guide to determining when, and how, to retire" and can be found on J.P. Morgan Asset Management's website.

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themselves. Although information in this document has been obtained from sources believed to be reliable, CSL does not guarantee its accuracy or completeness and accept no liability for any direct or consequential losses arising from Its use.

CSL does not provide discretionary portfolio management services.

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Citibank N.A. UAE is registered with Central Bank of UAE under license numbers BSD/504/83 for Al Wasl Branch Dubai, 13/184/2019 for Mall of the Emirates Branch Dubai, BSD/2819/9 for Sharjah Branch, and BSD/692/83 for Abu Dhabi Branch.

This is not an official statement of Citigroup Inc. and may not reflect all of your investments with or made through Citibank. For an accurate record of your accounts and transactions, please consult your official statement. Before making any investment, each investor must obtain the investment offering materials, which include a description of the risks, fees and expenses and the performance history, if any, which may be considered in connection with making an investment decision. Each investor should carefully consider the risks associated with the investment and make a determination based upon the investor’s own particular circumstances, that the investment is consistent with the investor’s investment objectives.
At any time, Citigroup companies may compensate affiliates and their representatives for providing products and services to clients.

United Kingdom: This document is distributed in the U.K. by Citibank UK Limited and in Jersey by Citibank N.A., Jersey Branch.

Citibank UK Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Our firm’s Financial Services Register number is 805574. Citibank UK Limited
is a company limited by shares registered in England and Wales with registered address at Citigroup Centre, Canada Square, Canary Wharf, London E14 5LB, Companies House Registration No. 11283101.

Citibank N.A., Jersey Branch is regulated by the Jersey Financial Services Commission. Citi International Personal Bank is registered in Jersey as a business name of Citibank N.A. The address of Citibank N.A., Jersey Branch is P.O. Box 104, 38 Esplanade, St Helier, Jersey JE4 8QB. Citibank N.A. is incorporated with limited liability in the USA. Head office: 399 Park Avenue, New York, NY 10043, USA.

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