As the first quarter of 2025 came to a close, reports confirmed what many investors and retirees feared: the U.S. economy contracted by 0.3%, marking a pause in the growth streak observed in late 2024, and the worst quarter in nearly three years. 

While headlines focused on slowing consumer spending, increased market volatility, and uncertain Federal Reserve moves, many affluent Americans approaching retirement are left wondering: What does this mean for me? And, more importantly, what should I do about it?

The short answer: Don’t panic. Stay the course. Economic shifts—especially those marked by short-term contraction—are a natural part of the market cycle. What matters most is how you prepare, plan, and respond, particularly as you approach retirement. Here’s what you need to know.

Understanding the Q1 Economic Contraction

According to the Bureau of Economic Analysis (BEA), the first quarter of 2025 saw the U.S. gross domestic product (GDP) fall at an annual rate of 0.3%, primarily due to a slowdown in consumer spending, reduced inventory investments, and decreased exports. Inflation, though cooling, remained sticky at around 2.4%, still above the Federal Reserve’s long-term target of 2%.

Other contributing factors included:

• Geopolitical instability, particularly in Eastern Europe and parts of Asia.
• Persistent supply chain disruptions in key industries like automotive and semiconductors.
• Volatile energy prices are tied to OPEC+ production decisions.

While these issues pose short-term headwinds, it’s important to remember that the U.S. economy remains fundamentally resilient. Unemployment remains at 4.2%, and consumer balance sheets are generally stronger than they were pre-pandemic.

For HNW Pre-Retirees: Why Staying the Course Matters

If you’re within 5 to 10 years of retirement, your instinct might be to make quick changes to your portfolio or financial strategy in reaction to economic news. However, history has repeatedly shown that long-term discipline often outperforms short-term reaction, particularly for high-net-worth individuals whose retirement strategies are built over decades, not quarters.

Key reasons to stay the course:

1. Volatility is Normal, Not Abnormal: Markets do not move in straight lines. Temporary contractions—whether due to inflation concerns, rate changes, or global tensions—are part of a natural economic rhythm. 
2. Timing the Market Is Not a Strategy: Jumping in and out of the market based on fear or news cycles is notoriously difficult, even for seasoned investors. Missing just the 10 best days in the market over a 20-year period can significantly reduce portfolio growth potential. Staying invested helps ensure you’re there for the recovery as well as the downturns.
3. Your Strategy Should Be Customized to Your Timeline: The closer you get to retirement, the more your financial strategy should reflect personalized risk tolerance, income needs, and legacy goals, not the headlines. A well-diversified plan should already account for market turbulence and inflationary pressures.

The Fed’s Role: What Comes Next?

The Federal Reserve has recently signaled a more cautious approach to interest rate cuts due to persistent inflation.

This means:

• Interest rates may remain elevated longer than expected.
• Borrowing costs for homes, credit cards, and business loans will stay higher.
• Bond yields may remain attractive but volatile.

For retirees and pre-retirees, this could mean continued upward pressure on fixed-income yields, but more care is needed in evaluating interest-sensitive investments, such as real estate or long-term bonds.

Rethinking Your Retirement Income Strategy

One of the most pressing concerns during economic contractions is income stability in retirement. If you’re not working full-time or plan to retire soon, you’ll want to review how your income sources might be impacted by a slower economy.

Potential considerations:

• Are you too heavily reliant on equity markets for income?
• Do you have a reliable income floor (e.g., pensions, annuities, Social Security)?
• Are you drawing from the most tax-efficient sources first?

Now may be a good time to evaluate your withdrawal strategy to help preserve principal while ensuring long-term sustainability. Working with a financial advisor who understands the nuances of longevity risk, inflation protection, and legacy planning can be instrumental in helping you navigate these decisions confidently.

Focus on What You Can Control

While you can’t control GDP numbers, Fed decisions, or geopolitical risks, there are important steps you can take right now:

1. Reassess Your Goals: Are your retirement goals still aligned with your current strategy? Sometimes, changes in the economy can help clarify what truly matters. Whether it’s a travel-heavy lifestyle or leaving a legacy to your children, refocusing can help bring peace of mind during uncertainty.
2. Diversify with Purpose: Diversification remains a fundamental strategy for helping reduce risk. This doesn’t mean simply spreading assets thinly, but allocating them in a way that aligns with your specific needs. For high-net-worth individuals, this could include alternative investments, income-generating assets, and tax-efficient vehicles that don’t rely solely on market performance.
3. Create a Withdrawal Strategy for Volatile Markets: One commonly used approach during market downturns is the “bucket strategy”, which segments assets by short-term (1–3 years), mid-term (3–7 years), and long-term (7+ years) needs. This helps avoid selling investments at a loss to cover income needs during down markets.
4. Review Your Tax Strategy: In a higher-rate environment, efficient tax planning is more important than ever. Roth conversions, tax-loss harvesting, and managing required minimum distributions (RMDs) are all tools that may help minimize taxes over the long term.

Looking Ahead: A Historical Perspective

Historically, economic slowdowns are often followed by periods of strong growth. For example:

• After the 2008–2009 Great Recession, the economy grew for over a decade, with the S&P 500 gaining nearly 400% from its lows by early 2020.
• Even after the brief but sharp COVID-19 recession in Q2 2020, the economy rebounded with GDP growth of 5.7% in 2021, one of the strongest in decades.

These past recoveries reinforce the value of maintaining a well-structured retirement plan that can weather downturns while remaining positioned for future growth.

How CKS Summit Group Helps Navigate Economic Shifts

At CKS Summit Group, we’re experienced in helping affluent Americans approaching retirement find retirement strategies right for them. While we do not provide investment advice, our team helps you:

• Understand the risks and opportunities in today’s economy
• Evaluate your income strategy for sustainability and efficiency
• Find a plan that reflects your values and vision for retirement

We’re committed to educating clients on the ever-changing economic landscape and providing the insights necessary to help you make informed decisions.

Final Thoughts: Stay Calm and Stay Informed

The Q1 economic contraction is a reminder that volatility is part of the retirement journey, not the end of the road. Wealthy individuals near retirement often face more complex challenges, but also more options for resilience and growth.

The key is not to overreact, but to plan proactively, diversify intentionally, and align your finances with your long-term vision. Staying the course doesn’t mean doing nothing. It means acting with purpose, perspective, and patience.

Want to learn more about navigating retirement during uncertain times? Contact CKS Summit Group for a no-obligation, educational consultation today.

Frequently Asked Questions

1. What does a GDP contraction mean for my retirement plans?
A GDP contraction indicates a slowdown in overall economic activity, which can lead to increased market volatility and slower investment growth in the short term. However, if your retirement strategy is well-diversified and designed for long-term sustainability, a single quarter of negative growth is unlikely to derail your overall plan

2. Should I make changes to my portfolio when the economy shrinks?
Making sudden or emotionally driven changes to your portfolio during economic downturns can increase risk. History shows that long-term investors who stay the course tend to fare better than those who try to time the market. It’s important to evaluate your strategy based on your risk tolerance, retirement timeline, and income needs, not short-term news cycles. You may also want to consult with a financial professional before making changes to your portfolio.

3. How can I help ensure a reliable income during economic uncertainty?
Establishing a retirement income plan that includes multiple income sources, such as Social Security, pensions, and other conservative income-producing assets, can help ensure more stability during volatile periods. Strategies like the “bucket approach” or creating an income floor can help provide protection against market downturns while supporting your lifestyle.

4. What actions can I take if I’m concerned about inflation and interest rates?
If inflation or high interest rates are a concern, reviewing your spending, evaluating your fixed-income exposure, and reassessing your tax strategy may be helpful. Consider discussing options such as Roth conversions, tax-efficient withdrawals, or adjusting your allocation with an advisor to help preserve purchasing power in retirement.

Important Disclaimer: CKS Summit Group does not offer specific investment advice or recommend specific financial products. Our content is educational and designed to help individuals make informed decisions.