In volatile markets retirees need more than probabilities

With zigzagging markets and headlines stoking fear, retirees are calling their advisors to ask, “Are we going to be OK?”

In a traditional planning framework, here’s how the beginning of that conversation often goes:

Advisor: “I just reran your plan, and your probability of success dropped from 85% to 70%. But let’s not panic. I think you’ll still be fine.”

That input isn’t exactly something that helps clients sleep better at night, because not knowing the outcome of their financial plan creates more stress than knowing, even when the news is bad. 

Research from other fields backs this up. Patients who are waiting for uncertain news often report more stress and anxiety than patients who receive bad news. Why? Because the brain hates the unknown. Uncertainty creates fear, stress and anxiety. 

Financial planning is no different. A 70% chance of success might sound like acceptable odds to an advisor, but to a retiree it lands like this: “Wait … so there’s still a 30% chance I could run out of money?”

READ MORE: Advisors’ growing role in uncertain times

Risk cure

The probability of a financial plan’s success is a statistical snapshot, not a strategy. That number doesn’t tell the client what failure looks like, when it might happen or how to respond. That’s why it fails to ease fear in moments of uncertainty. It just leaves them hanging. Stuck in limbo. 

And there’s where the real risk lies. Uncertainty isn’t just uncomfortable, it leads to poor, impulsive decisions. The best way to reduce uncertainty isn’t to eliminate risk — you can’t — it’s to frame it in a way people can clearly understand. Such “guardrails” offer retirees a way to see and set clear expectations about how much their income might change, when and why. In other words, it’s not about perfection, it’s about preparation.

Now imagine the same client conversation couched in language that replaces uncertainty with specific action.

Advisor: “Remember the retirement guardrails we set up? You’re still well above the lower guardrail. Your portfolio would have to drop another $200,000 before we make any changes. And even then we would dial your income down only slightly, from $9,500 to $9,000 a month.”

Client: “That’s actually really reassuring. Thanks!”

That’s the difference between abstract risk and real-world clarity. Reminding clients of preestablished planning guardrails shifts the conversation away from what might go wrong and lets clients see exactly when and how things would change, and by how much.

READ MORE: The retirement withdrawal strategies advisors prefer

Worst-case scenario

When you couch this method with historical stress-testing, you add something even more powerful to the conversation: context.

Most retirees vividly remember the global financial crisis of 2007-2009. They remember the panic, the headlines, the fear of financial ruin. So when their plan is run through that exact financial scenario and the result is small, manageable adjustments instead of disaster, fear is replaced with perspective. 

This gives them something better than hope — it gives them confidence.

Take the hypothetical example of a couple, Paul, 65, and Pam, 63. With a $1 million portfolio in a 75/25 allocation, they’re planning to file for Social Security at full retirement age, each with a primary insurance amount of $2,500. 

I ran their plan through a great-financial-crisis simulation. Had Paul and Pam followed their guardrail strategy during that period, their plan would have hit the lower guardrail in February 2009, which would have triggered a modest, temporary monthly income adjustment to $7,040 from $7,350. By June 2017, with markets fully recovered, they crossed the upper guardrail, and income increased to $7,700.

That’s not devastation. That’s a plan doing what it’s supposed to do: flexing under pressure, adjusting intelligently and staying on course.

Change is constant, and the ability to adapt and guide is what sets great advisors apart. It’s not just about weathering the storm, it’s about guiding clients through it and getting to the other side stronger and more prepared than they were before.