Are your investments built to deliver income during market turbulence?

For much of your working life, investing is about growth. You invest regularly. Your investments rise and fall, and over time, the aim is to build wealth.

As retirement approaches, the focus begins to shift.

Growth still matters, but income becomes the priority. Investors want reassurance. Will my portfolio produce the income I need for the rest of my life?

That question often feels straightforward when markets are calm. But calm markets rarely last forever. Periods of volatility arrive from time to time, and sudden events often cause concern.

The challenge is turning the wealth you’ve built into a reliable stream of income. Even during market turbulence.

Why market downturns matter more in retirement

When you are still saving, market downturns are usually easier to navigate. You continue investing and, with patience, give markets time to recover. Though there are no guarantees.

Once withdrawals begin, the situation changes. You still need income, even when markets fall. If withdrawals happen during a downturn, investors may need to sell assets at lower prices.

That leaves less capital invested when, or if, markets recover. Over time, this can affect how long a portfolio can last.

This is why retirement planning is so important. It not only focuses on investment returns, but also on how you take income.

Financial planners use cash flow modelling and stress test how portfolios might behave under different market conditions. The goal is to build a strategy that can support income even during volatile markets.

Growth investments and income investments

Many portfolios focus on growth. Shares have historically delivered strong long-term returns and are key to wealth building.

However, shares can be volatile in the short term. The value of an individual share may rise and fall significantly from year to year.

Income investments play a slightly different role. Rather than relying solely on growth, they generate cash flows through dividends, bond interest or income from infrastructure and property assets.

For investors drawing income, these cash flows can provide useful stability. In practice, many portfolios combine both growth and income investments. Growth helps the portfolio keep pace with inflation. Income assets can help to provide a steadier stream of withdrawals as you may not need to sell assets when markets are down to generate the income required.

Why diversification is key

Diversification is often described as a basic rule of investing. In retirement planning, it becomes far more practical.

A portfolio designed to support income will usually be drawn from several sources. These may include shares, bonds, real assets (like gold), and cash reserves. The spread of diversification and assets held will be down to the fund or investment manager selected.

When stock markets fall sharply, bonds or defensive assets can provide greater stability. When inflation rises, other assets may perform better.

Financial planners often build portfolios with this balance in mind. It’s impossible to eliminate volatility entirely. The key is to make sure that income does not depend too heavily on a single investment or market outcome.

The role of cash reserves

Cash may appear unexciting. But it can play a crucial role in retirement income planning.

Holding some cash or lower-risk assets can provide flexibility during market downturns. Instead of selling investments at lower prices, you have the option to draw income from this reserve while waiting for markets to recover. A rough guide might be to keep one or two years of planned withdrawals in cash. This can provide breathing room during difficult periods.

The right balance will depend on individual circumstances.

Too little cash increases risk during downturns. Too much may reduce long-term growth. This balance is part of the planning process that a financial planner helps clients navigate.

How portfolio structure affects withdrawals

Consider two investors starting retirement with similar portfolios worth £500,000. Both plan to withdraw £20,000 per year, which is roughly a 4% withdrawal rate.

The first investor keeps the entire portfolio invested. The second keeps £40,000 in cash, enough to cover around two years of planned withdrawals.

In their first year of retirement, markets fall by 10%.

Both investors experienced the same market decline.

But the second investor avoided selling investments during the downturn. Instead, their income came from the cash reserve.

The difference after one year is modest. But repeated over many market cycles, decisions like this can influence how long retirement savings last.

Financial planners tend to look at income in a broader context. Focusing on portfolios built from several sources of income and cash reserves. A blend that works together. They’ll consider how your whole portfolio supports withdrawals over the long term.

How financial advice can help

Turning investments into reliable retirement income is rarely simple.

You need to consider how long the income may need to last, potential market downturns, and tax efficiency.

Financial bring these elements together. They use cash flow modelling, recommended diversified investment strategies, and structured withdrawal plans. They’ll build personalised portfolios designed for long-term income.

This detailed planning becomes particularly valuable as retirement approaches. And financial decisions begin to have lasting consequences.

The questions for you to answer

Market turbulence is inevitable. The real question is whether you’ve built your portfolio with that reality in mind?

If markets experienced a prolonged downturn, could your investments continue to provide the income you need? Or would withdrawals force difficult decisions at the wrong time?

Taking the time now to review your retirement income plan and getting expert financial advice can make a significant difference.