A financial blueprint can help investors weather volatility while saving for retirement
April 20, 2025
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When it comes to saving and investing for retirement, especially during times of volatility, there’s no need to complicate it. In fact, you should make saving as easy to implement as possible, according to Brian Walsh, the head of advice and planning at SoFi.
The best way to save and invest your money is to have a financial blueprint, or a structured framework that guides your investment decisions based on your specific goals, time horizons, and risk tolerance.
Like an architectural blueprint for a house, a financial blueprint provides the foundational plan that helps you build your financial future with purpose rather than reacting emotionally to market changes.
A blueprint allows you to “always make sure that you’re investing based on your goal” and plan for “when you’re going to use your money,” Walsh, who is also known as “Dr. Money,” said in a recent episode of the Decoding Retirement podcast (see video above or listen below).
One of the best financial blueprints to use is what Walsh calls the three-bucket investment approach, where you invest based on your time horizons.
For money you need in the short term (less than three years), “Money should not be invested [in stocks]. Period,” Walsh said. “Think money market funds, short-term bonds, high-yield savings.”
This conservative approach for short-term funds recognizes that market volatility could devastate money you need soon, so preservation of capital takes absolute priority over growth potential.
The second bucket is for intermediate funding needs of three to 10 years. For that, you want “a mix of stocks and bonds,” Walsh said. “That’s long enough where you can actually deal with volatility.”
This balanced approach gives you enough time to weather market downturns while still providing growth potential. The intermediate timeframe allows you to take calculated risks without jeopardizing near-term financial goals.
Read more: Here’s what to do with your retirement savings in a market sell-off
For the third bucket, dealing with long-term (10+ years) funding needs, Walsh advised investing in “mostly equities.”
With this extended timeline, you can afford to weather multiple market cycles and capitalize on the historically superior returns of stocks compared to other asset classes. The decade-plus horizon means short-term volatility becomes merely a blip in your overall investment journey, allowing you to focus on maximizing growth rather than minimizing fluctuations.
“We start with that framework,” Walsh said, noting that “you always need to make sure that you’re investing based on your goal.”
In the podcast, Walsh also emphasized the importance of understanding the difference between your emotional comfort with risk — your risk tolerance — and your financial ability to absorb losses — your risk capacity — when making investment decisions.
“Risk tolerance is one thing,” he said. “Risk capacity is a completely different thing.”
Young investors should be able to tolerate risk, but having the ability to withstand the market’s ups and downs is also very important. One has to be “totally on board with some volatility and some risk,” Walsh said.
But having a framework in place can help investors resist three key investment biases that can affect decision making, especially during volatile periods.
Walsh discussed loss aversion, a concept introduced by Daniel Kahneman, a Nobel laureate in Economic Sciences, and psychologist Amos Tversky that posits that people tend to feel the pain of losses about twice as strongly as they feel the pleasure of equivalent gains.
Another bias is confirmation bias, which leads people to seek out information that supports the story they already believe — whether it’s accurate or not, Walsh said.
And people often experience hindsight bias, where they believe they should have seen something coming, even if it was truly unpredictable.
For example, after COVID hit, some might think, “I should’ve sold my investments right after the first case in China. I could’ve made a lot of money,” Walsh said, even though that would’ve been nearly impossible to foresee at the time. He noted that after unpredictable events, people “feel like they should have known.”
The challenge, Walsh said, is recognizing those biases and figuring out how to manage them, whether it’s by slowing down and reflecting more critically or by using tools like automation and technology to help make more objective choices.
Each Tuesday, retirement expert and financial educator Robert Powell gives you the tools to plan for your future on Decoding Retirement. You can find more episodes on our video hub or watch on your preferred streaming service.
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