Riding the retirement investment rollercoaster: Market volatility and your savings

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We don't need to tell you that markets can be unpredictable. Whether it's global events, economic shifts, or simply the natural market cycles that come with any investment, there will always be periods of volatility. It’s perfectly natural to wonder: "How will my investments hold up to the inevitable ups and downs of the markets?"

After decades of building your nest egg, watching your investment values fluctuate can feel particularly unsettling when you're relying on them for income. The good news? With a thoughtful approach, you can minimise the effect market volatility has on your peace of mind.

Why market movements matter more in retirement

Market volatility impacts retirees differently to other investors, due to what financial experts call "sequence of returns risk." This refers to the timing of withdrawals from your investment portfolio relative to market returns.

If you begin withdrawing from your investments during a market downturn, you're selling assets at lower prices. This creates a double-negative effect: your portfolio value decreases with the market, and your withdrawals further reduce the assets that would have helped your portfolio recover when the market rebounds.

Equity markets can often take many years to recover from significant downturns. For retirees who rely on regular income from their investments, this timing can substantially impact how long their money lasts—even if average returns over their full retirement period are positive.

Preparing for volatility before retirement

If you're approaching retirement within the next few years, consider these strategic steps:

Gradual portfolio adjustments

Rather than making dramatic shifts in your investment approach, implement a gradual transition toward your retirement asset allocation. This might mean slowly increasing exposure to more stable assets while maintaining growth components.

For example, if you've been invested in 10X's flagship 10X Your Future Fund (which is more growth focused), you might begin transitioning some of your portfolio to the 10X Moderate Fund or 10X Defensive Fund as you approach retirement.

Build a retirement cash buffer

Consider building a cash buffer that can fund your first 1-2 years of retirement expenses. This provides two significant benefits:

• It reduces the pressure to sell investments during market downturns
• It gives you peace of mind knowing your immediate needs are covered regardless of market conditions

With this buffer in place, you can temporarily reduce withdrawals from your investment portfolio during market downturns, allowing your investments time to recover. You also give your portfolio more time to benefit from more significant compound interest (as compound interest works harder for you the further along you are in your investment journey).

Managing volatility during retirement

Once you've entered retirement, your focus shifts from accumulation to distribution — instead of saving as much and as fast as you can, you’re now trying to maintain the value of your investments by mitigating risk. That said, growth remains essential. Here's how to think about managing volatility during your retirement years:

Understanding the Golden Equation

At 10X Investments, we emphasize what we call the "golden equation" for retirement sustainability:

Drawdowns + Fees + Inflation ≤ Return on Investment

For your retirement savings to last, your total expenses (including withdrawals, fees, and inflation) must not exceed your investment returns. During volatile periods, maintaining this balance becomes even more critical.

Using 10X's Living Annuity Calculator can help you determine a sustainable withdrawal rate based on your specific circumstances and market conditions.

Flexible Withdrawal Strategies

One of the most powerful tools for managing volatility in retirement is adjusting your withdrawal rate during market downturns:

• Flexible 4% approach: While starting with a 4% withdrawal rate provides a baseline, being willing to reduce withdrawals during market downturns can significantly extend your portfolio's life.
• The bucket strategy: You can consider dividing your portfolio into short-term (1-2 years), medium-term (3-10 years), and long-term (10+ years) buckets. You can draw from the short-term bucket during market downturns, allowing your growth assets time to recover.

This flexibility aligns with the 10X fund range, where you can allocate portions of your portfolio to different funds based on when you'll need the money.

The 10X approach to volatility management

The 10X investment philosophy is built on three principles that are particularly valuable when managing retirement volatility:

We focus on asset allocation

According to our analysis, asset allocation determines approximately 90% of investment returns over the long term. So, it’s actually far more important than individual stock selection. At 10X, we focus primarily on getting this allocation right, adjusting our emphasis based on 5-10 year forward-looking expectations rather than short-term market movements.

This approach means we're not trying to predict next month's market moves; we're positioning your portfolio for better returns over the next 5-10 years, which is a more relevant timeframe for retirees.

We focus on index diversification

Research consistently shows that most active managers underperform their benchmarks after fees. By using index funds with our carefully designed asset allocation, we provide broad market exposure without the higher costs and underperformance risks of active management.

For retirees, this translates to capturing market recoveries reliably without paying premium prices for active management that may not deliver better results.

We keep costs as low as possible

Every bit of cost saved on our side means more of your money is invested to compound over time. All else being equal, a 0.5% reduction in annual investment fees can lead to approximately 11% more money in retirement after 20 years—a meaningful difference when managing volatility.

Our low-cost approach ensures that more of your money stays invested, working for you rather than covering high fees—which is especially important during market recoveries.

10X Funds: Tailored solutions for every retirement need

10X offers a range of funds designed to address different risk profiles and retirement scenarios:

For your core retirement portfolio:

• 10X Your Future Fund: Our flagship fund, with a mix of equities and more conservative assets like bonds. This balanced approach aims to deliver returns of inflation plus 5.5% over 5-10 years, providing growth potential while managing volatility for most retirees.
• 10X Moderate Fund: Slightly more conservative than the 10X Your Future Fund, ideal for those within 5-10 years of retirement or early in their retirement journey who want a moderate approach.
• 10X Defensive Fund: Our most conservative option, with less offshore exposure and growth assets, suitable for retirees prioritizing capital preservation over growth.

For offshore diversification:

• 10X MSCI World Index Feeder Fund: 100% offshore exposure, ideal for retirees with significant South African-based assets looking to hedge against local market and currency risks.
• 10X International Medium Equity and 10X International High Equity: Blends of the MSCI World Index Feeder Fund and the 10X Your Future Fund, offering different levels of offshore exposure while maintaining some local investments.

This range allows you to create a portfolio aligned with your specific needs and risk tolerance during retirement, providing flexibility to adjust as market conditions change.

Finding the right investment balance for your retirement

The key to managing volatility in retirement isn't eliminating it entirely but finding the right balance between growth and protection:

Maintain some growth exposure:

With potentially 20+ years in retirement, inflation becomes a significant threat to your purchasing power. Maintaining some exposure to equities provides essential protection against rising prices.

Our 10X Your Future Fund aims to deliver returns of inflation plus 5.5% after fees over 5-10 years, which is only possible because of the earning potential of investing in businesses through equities. This is why even our 10X Defensive Fund maintains some equity exposure—completely avoiding growth assets creates its own risks in retirement.

Consider offshore diversification:

Allocating a portion of your portfolio to offshore investments can provide an important hedge against local market volatility and currency fluctuations. With 10X's international offerings, you can easily incorporate global exposure into your retirement strategy.

This approach is particularly valuable for South African retirees given our relatively small market size compared to global markets, offering exposure to sectors and companies not well-represented locally.

Understand how costs impact your retirement

During market recoveries, fees can have a compounding effect on your returns. Think of it this way: when your investment is growing, high fees take a larger absolute amount from your returns. This means less money stays invested to benefit from future growth—a critical factor when recovering from market downturns.

This is why understanding your Effective Annual Cost (EAC) is crucial. The EAC reflects the total annual expenses associated with your investment. 10X's approach of minimising fees means that our clients keep more of their returns — which is particularly valuable during market recoveries.

Use 10X's EAC Calculator to understand the true cost of your investments and how much you could save by switching to a lower-cost provider.

Practical steps for retirees and near-retirees

If recent market volatility has you concerned about your retirement security, here are concrete steps to take:

Review your asset allocation

Assess whether your current asset allocation strikes the right balance between growth and stability for your specific timeline and needs. Avoid making emotional decisions based on recent market movements — instead, focus on your long-term requirements.

Test different drawdown scenarios

Use 10X's Living Annuity Calculator to model different withdrawal rates and see how they affect the sustainability of your retirement income, especially during periods of market volatility.

Consider direct investment

If you're currently working with a financial advisor, you might be wondering if there's a more cost-effective way to manage your retirement investments. While advisors can provide valuable guidance, their fees add another layer of cost to your investment strategy.

10X's direct investment approach eliminates advisory fees while still providing support through our experienced investment consultants, who can help you understand our products and how they might fit into your retirement strategy - totally free of charge.

Maintaining your confidence through volatility

Market volatility is an inevitable part of investing, but with 10X's thoughtful fund design, low-cost approach, and focus on proper asset allocation, you can navigate market uncertainty with greater confidence.

Remember that despite short-term fluctuations, markets have historically rewarded patient, disciplined investors. The key is having the right strategy for where you are in your life — one that balances protection of your capital with the growth needed to fund (potentially) decades of retirement.

If you'd like to explore how 10X's range of funds might fit into your retirement volatility management strategy, our investment consultants are ready to answer your questions. Book a free consultation today to take the first step toward a more secure retirement, regardless of market conditions.