The plastic pull rod inside the shift handle probably broke or became detached. Either way, it should be replaced which is most easily done by removing the shift handle assembly which will require a trip under the car.

Volvo USA says this part is NLA, but I just checked the GCP website and they show them as still available and they should be less than $10.00.

Because we thought this part was discontinued, we had some copied via a 3rd party with a 3D printer and we have needed to use or sell 1.

If you get stuck and you need to get the car in reverse, you can pull up the shift boot and then remove the 2 bolts that hold the reverse lockout plate to the shift support bracket that is attached to the transmission. You can then put it in reverse. Use a marker or some paint on the reverse lockout bracket around the edges of the 2 bolts before you remove them to act as witness marks so you can put the lockout plate back in the same position.

FYI, driving with the reverse lockout bracket removed can be tricky as it can be hard to know when you are shifting into reverse or 1st gear and finding 2nd gear can be fun too.
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Eric
Hi Performance Automotive Service (formerly OVO or Old Volvos Only)
Torrance, CA 90502
hiperformanceautoservice.com or oldvolvosonly.com