Are you losing sleep over geopolitical tensions and their impact on your retirement savings? You’re not alone, but there’s a bigger picture you might be missing. While it’s natural to feel uneasy watching your portfolio fluctuate amid global crises, financial experts argue that these moments are precisely what a well-crafted retirement plan is designed to weather. But here’s where it gets controversial: Is your retirement plan truly prepared for the unexpected, or are you just one geopolitical event away from panic?
Recent events, such as the U.S. and Israeli military strikes on Iran—including the assassination of Iran’s supreme leader, Ayatollah Ali Khamenei—have sent shockwaves through global markets. Tehran’s retaliatory missile and drone attacks across the Gulf region further fueled uncertainty, causing North American markets to plummet alongside a broader global decline. And this is the part most people miss: According to a Fidelity survey, 59% of financial advisers rank geopolitical risk as the top macroeconomic threat to portfolios this year, surpassing even market volatility and inflation. The survey, conducted among 2,500 to 3,100 advisers in late January, highlights the growing concern among professionals.
But should you be hitting the panic button? Not so fast, say financial planners. Adam Chapman, a certified financial planner and founder of YESMoney, emphasizes that downturns are an inevitable part of investing. “You should assume they’re going to happen,” he advises. A robust retirement plan should already account for these fluctuations, preventing knee-jerk reactions that could harm long-term goals. Yet, the urge to panic is often strongest among new retirees, who may feel uneasy as they transition from saving to spending their nest egg. This shift can introduce what planners call “sequence of returns risk,” where early market declines during retirement withdrawals can amplify losses.
Colin White, CEO of Verecan Capital Management, adds a bold perspective: “If you feel the need to overhaul your portfolio because of a war, you’ve got a bad portfolio.” He argues that portfolios should be built to withstand geopolitical shocks, not predict them. Some advisers use Monte Carlo simulations to test retirement plans against thousands of market scenarios, but Chapman warns these tools can create unnecessary anxiety. “If you’re stress-testing your plan and still feel uneasy, something deeper might be missing,” he notes.
Instead, Chapman recommends a holistic approach: Review your entire financial plan, including short- and long-term goals, to ensure you’re on track. Chris Raper, a portfolio manager at Aspira Wealth, suggests using geopolitical tensions as an opportunity to assess your portfolio’s geographic diversity. For instance, many Canadians are overexposed to U.S. markets, which now dominate around 72% of the MSCI World stock market index, up from 48% in 2010.
Raper also highlights a critical oversight many retirees make: failing to set aside enough cash for emergencies. He advises keeping one to three years’ worth of expenses in a high-interest savings account to avoid selling investments during a downturn. “You never want to sell stocks in a down market to cover expenses,” he warns. “Historically, even the most severe equity market declines recover within three years.”
But here’s the question that could spark debate: Are financial planners overly optimistic, or are retirees underestimating the resilience of their portfolios? While experts argue that well-prepared plans can weather geopolitical storms, the emotional toll of market volatility often leads to second-guessing. What’s your take? Do you feel your retirement plan is equipped to handle the unexpected, or is it time to reevaluate your strategy? Share your thoughts in the comments—let’s start a conversation!
