Franklin Templeton U.S. retirement head Steve McKay says the biggest behavioral mistake in volatile markets is turning legitimate economic concerns into an all-or-nothing decision, such as moving entirely to cash, which could derail long-term retirement plans.
Market concerns persist despite the S&P 500 nearing an all-time high: Morningstar says tariffs, inflation, energy prices and higher borrowing costs have hurt stocks beneath the surface, and nearly 60% of S&P 500 stocks were at least 20% below their all-time highs in August. McKay says investors with 20- or 30-year horizons also face purchasing-power and opportunity-cost risks in cash; cash yields can reset lower when short-term rates fall.
McKay said stable-value funds in 401(k), 403(b) and 457 plans may help preserve capital; he also cited high-quality intermediate-term bonds, which can lock in current yields longer and gain if rates decline. Advisor Keith Demetriades says resilient retirement portfolios balance growth, stability, income and flexibility. Annuities can provide guaranteed lifetime payments, but may carry substantial costs and reduce liquidity and control; McKay calls guaranteed income insurance against longevity, not a return-maximizing investment.
