How to Protect Your Retirement Savings Now as Markets Plunge

“Stay the course.” “Tune out the noise.” “Focus on the long term.”That’s the advice that experts typically play on repeat at times like these, when stock prices are volatile or falling — as they did Thursday, when the S&P 500 dropped nearly 5 percent, its worst decline since the pandemic in 2020.It is wise counsel for most people, since no one knows for sure which way the market or the economy will end up this year, and missing out on stock gains, even briefly, can put a big dent in your retirement savings.What’s more, over periods of 10 to 20 years or more, stocks have always bounced back handily after downturns, leaving investors who remained steadfast with far bigger balances than they had before the turmoil.But what if you don’t have a decade or more to wait out a recovery?For anyone who intends to leave the work force in the next few years or who has recently retired, the current financial environment is perilous.

If you’re still working, a recession could push you out of a job earlier than planned, cutting short the time you have left to save and extending the period you need those savings to last.And for both near and recent retirees, a big drop in stock prices increases the risk you’ll eventually run out of savings.“What happens to the market and the economy in those near and early retirement years matters disproportionately to the success of your entire retirement plan,” said Wade Pfau, a professor at the American College of Financial Services and author of “Retirement Planning Guidebook.”That’s why financial experts often refer to this period — roughly the five years before or after you stop working — as the retirement danger zone, and urge people in it to be proactive about reducing their risks.

Here are five steps they recommend taking now.Build a Cash CushionWhen stock prices drop just as you start withdrawing funds to cover expenses, you have to sell more shares to meet the same spending needs.That leaves le...