Bold statement: Geopolitical risk isn’t just a headline—it’s a real test for your retirement plan, and how you respond now could shape your future. If you’re approaching or already in retirement, watching markets swing because of global tensions can feel especially jarring.
A Fidelity survey shows that more than half of advisers rank geopolitical risk as their clients’ top concern. Yet financial planners insist that downturns are exactly the sort of scenario retirement plans are designed to endure. In the wake of U.S. and Israeli military actions in Iran, including the removal of Iran’s supreme leader, Ayatollah Ali Khamenei, Tehran’s retaliation with missiles and drones across Gulf bases has sparked a broad market pullback. North American stocks dropped Tuesday as part of a wider global sell-off.
The Fidelity survey, which polled between 2,500 and 3,100 advisers on January 28 at Fidelity’s Toronto Vision hybrid event, found that 59% expect geopolitics to be the macroeconomic factor most affecting portfolios this year, ahead of market volatility and inflation.
From inflation to mortgage rates, the Iran conflict has potential ripple effects on your finances, including energy costs and broader market dynamics.
Yet planners remind us that recessions and pullbacks are inherent to investing. “You should assume they’re going to happen,” says Adam Chapman, a certified financial planner and founder of YESMoney in London, Ontario. That mindset should already be embedded in your retirement plan; otherwise, declines can trigger panic and impulse moves that hurt long-term results.
New retirees often feel the urge to panic most acutely. “Sitting on the sidelines becomes tougher once you retire, even with a solid plan,” Chapman notes. After decades of saving, retirees start drawing from their nest egg. When markets fall while withdrawals continue, you face what planners call “sequence of returns risk.” Early downturns in retirement can compound losses more severely than the same dip later on.
Colin White, a certified financial planner and CEO of Verecan Capital Management in Halifax, says no one can predict every geopolitical outcome. But periods like this serve as a stress test for both your retirement strategy and the adviser behind it. If you feel compelled to overhaul your portfolio because of a war, White argues that your portfolio isn’t well designed. A robust plan should assume that such events will happen, not try to time them.
Some advisers use Monte Carlo simulations to test how a plan might perform across thousands of market scenarios. Chapman, however, cautions that these tools can raise anxiety and may not reflect real-world conditions exactly. If a stress test reveals anything under 100% success, it’s easy to feel unsettled.
Instead, Chapman suggests a thorough walkthrough of your entire financial plan with your adviser—clarifying short- and long-term goals to ensure you’re still on track, regardless of geopolitical tremors.
For Canadians, rising gas costs could accompany broader energy shifts from the Iran conflict, but an energy glut might cap price increases as well.
Victoria-based Chris Raper, a portfolio manager with Aspira Wealth of Raymond James Ltd., emphasizes using geopolitical tensions as a chance to assess geographic diversification. He notes that many Canadians are more exposed to U.S. markets than they realize, partly because U.S. stocks have performed strongly in recent years. In 2010, U.S. stocks accounted for 48% of the MSCI World index; today, that share sits around 72%.
Raper also highlights a practical rule: maintain 1–3 years’ worth of living expenses in a high-interest savings account. This cushion helps avoid selling stocks during downturns to cover current needs. “You never want to be in a position where you’re forced to sell in a down market to fund cash flow,” he says. Historically, equity markets tend to recover within about three years, even after severe declines.
If you’d like to test your market resilience or gain a clearer understanding of how long you can weather volatility, consider consulting a financial planner who can review both your strategy and your cash-flow plan.
And if you’re interested in staying ahead with market insight and practical portfolio challenges, you might enjoy Globe and Mail’s Trade Off—our free online stock-picking contest—with a $5,000 grand prize.
Question to readers: Do you believe a retirement plan should primarily emphasize diversification across asset classes, or should it focus more on diversification by geography and sector to weather geopolitical shocks? Share your stance in the comments and tell us how you’d adjust a plan in response to current events.
