Take Back Control: 7 Smart Financial Strategies During Market Volatility

Market volatility is a natural part of investing, even if it doesn't always feel that way—especially when headlines are filled with words like "turbulence" and "uncertainty." In those moments, it's tempting to react emotionally—either by pulling investments out of the market or ignoring your portfolio altogether.

But neither move helps build long-term success. The good news is, even in unpredictable times, there are thoughtful steps you can take to regain a sense of control and keep your financial plan on track.

Financial moves to consider in a volatile market

While extra care must be taken when considering withdrawing from or transferring parts of your investment portfolio, here are seven key strategies to explore with your First Citizens Wealth consultant to help you feel more confident navigating a volatile market and an evolving interest rate environment.

1Reassess your spending priorities

As the economy shifts and prices fluctuate, you may want to have a deeper look at your spending, specifically:

• Review your withdrawal strategy. If you rely on investment income for everyday expenses, work with your First Citizens Wealth consultant to review your withdrawal strategy when markets are down. Drawing from the right accounts in the right order can help preserve long-term value.
• Keep an eye on price increases. As tariff-related price increases begin to impact everyday goods, pay attention to the prices of goods you commonly consume. If certain items become more expensive, consider whether you can find a lower-cost alternative or pause the expense altogether.
• Consider making large purchases sooner rather than later. Planning a major purchase, like a house, automobile or appliance? If prices are expected to rise—as in the case of automobiles, which analysts are estimating may rise on average between $2,000 to $4,000, with some models seeing increases up to $12,000—you may want to move up your buying timeline to avoid higher future costs.
• If retirement is imminent, revisit your timing. Delaying just a few months or building a short-term cash cushion could help you avoid withdrawing from your investments during a downturn.

2Revisit your financial plan

Revisit your goals in your financial plan, especially your time horizon. A good financial plan is stress-tested for unfavorable conditions, so even with short-term volatility, the long-term prospects for your plan's success often remain largely the same. You may need to make small adjustments, such as ensuring your emergency fund remains appropriate and either speeding up or holding off on big purchases.

Times of uncertainty are also a good time to revisit the impact of recent retirement legislation on your retirement accounts, especially if you're working past age 70 or planning for future IRA contributions. Important changes to the SECURE Act 2.0 introduced several changes to retirement account rules.

• Required minimum distribution, or RMD, age increase to 73. The SECURE Act 2.0 increased the RMD age to 73 for individuals born between 1951 and 1959, and it will rise to 75 for those born in 1960 or later. This extension allows more time for tax-deferred growth before withdrawals are required.
• Maximum age for IRA contributions removed. There is no longer an age limit for contributing to a traditional IRA. As long as you have earned income, you can keep contributing, which is particularly helpful if you're working through this volatile period or phasing in your retirement.
• Qualified charitable contributions, or QCDs, are now indexed for inflation. If you're 70 ½ or older and looking for a tax-efficient way to give, QCDs allow you to donate directly from your IRA to a qualified charity. QCDs can count toward your RMD but aren't included as part of your taxable income. Under the SECURE Act 2.0, the $100,000 annual limit is now indexed for inflation and will increase to $108,000 in 2025. Additionally, a one-time QCD of up to $50,000 can be made to certain charitable trusts or gift annuities.

3Consider a conversion from a traditional to a Roth IRA

With today's market volatility and the possibility of higher future tax rates, it may be a good time to consider converting a traditional IRA to a Roth IRA. A Roth conversion means you'll pay taxes now on the amount you convert, but future withdrawals—earnings included—can be tax-free.

There are several reasons why a conversion may make sense now:

• Market dips mean lower cost to convert. If your IRA has temporarily lost value, converting now means paying taxes on a smaller amount, potentially reducing your overall tax liability.
• You may lower your taxes. Having a mix of tax-deferred and tax-free accounts in your portfolio gives you more control over how much you withdraw each year, and ultimately, how much tax you'll owe.
• You're not required to pull from it. Unlike traditional IRAs, Roth IRAs don't require you to start taking distributions at a certain age. This means you're able to maintain investments in a tax-free account, rather than being forced to transfer them to a taxable account.
• You may see estate planning advantages. A Roth IRA can include tax-free income distributions for you and your heirs. However, there's a caveat—beneficiaries must receive funds from an inherited Roth IRA account within 10 years.

Before converting, know that a conversion may push you into a higher tax bracket, and you can no longer undo a Roth conversion. You don't have to convert your whole IRA, though, so explore whether a Roth conversion fits into your strategy with a First Citizens Wealth consultant.

4 Maintain access to liquidity with a line of credit

In a high-rate environment, stowing away large amounts of cash may feel like the right thing to do, but it could limit your portfolio's growth potential. Consider obtaining a securities-backed line of credit in the event unexpected expenses occur or you want to make a large purchase during a market downturn.

Having a line of credit available secured against your investments helps in a few ways:

• Preserves your long-term investment positions
• Acts as a backup emergency fund
• Avoids the tax recognition event and capital gain taxes of selling securities
• May offer competitive interest rates even in a high-rate environment

5Reevaluate debt with today's interest rates in mind

Refinancing isn't as appealing today as it was during the low interest rate environment we experienced in the first few years of this decade. However, it still makes sense to explore your options. A good rule of thumb is that refinancing makes sense if you can reduce your interest rate by at least 2%. However, don't limit your review to just the mortgage. Now is a good time to reassess your entire debt picture, especially if you're carrying high-interest credit card balances or other non-mortgage debt.

When you reevaluate your debt, consider the following key ideas:

• Focus on reducing high-interest debt first
• Determine whether the equity you've built in your home can support your financial goals
• Be cautious about taking on new debt without a clear benefit

6Review your investment allocation

If recent market ups and downs have you questioning your strategy, discuss your allocation with your First Citizens Wealth consultant. You may benefit from adjusting your mix to better match your risk tolerance without making drastic changes to your bigger-picture plan. 

7Consider down-market advantages for estate planning

If you're planning on using your annual gift tax exclusion this year—currently $19,000 per person—making gifts when asset values are lower may allow you to transfer more shares without exceeding the annual limit. For larger gifts, this can also help you use less of your lifetime exemption, making your gifting strategy more efficient.

Final thoughts: Take back control

In volatile conditions, you can't control the market, but you can control how you respond to it. It's wise during times like these to make grounded, strategic decisions, like leaning into your financial plan, staying diversified and speaking to your First Citizens Wealth consultant regularly.

Want to stay in the know about the most up-to-date market news? Learn how this week's economic news could impact your portfolio from our Making Sense team.