If You're In or Near Retirement, Here's How to Prepare For and Manage the Next Bear Market

Anyone who’s retired in the past 10 years has been very fortunate. They’ve experienced a massive bull market, and they may even have a higher net worth today than when they retired! I call that a Good Luck Sequence.

But it won’t always be that way. Some people will have the unfortunate luck of retiring right into the teeth of the next bear market. And even though this is a Bad Luck Sequence, it doesn’t mean there is nothing you can do about it. To learn more about what these Good Luck/Bad Luck sequences and how they can impact your income and investment strategy during retirement, click here to learn more.  

Here are 4 things you can do right now to help ensure you are prepared for a market meltdown that may occur during your retirement years.

1. Review Your Budget

Market corrections make us feel powerless. Events on Wall Street or even the other side of the world suddenly seem to have more control over our finances than we do. That’s a scary feeling, especially if you’re on the cusp of retirement or newly retired.

Here’s a key to always remember—the single most powerful adjustment you can make to your financial plan is controlling how much you spend and save.

If you’re a new retiree or about to retire, your spending plan should already be set by distinguishing between the “got to have” and the “want to have” as mentioned in the last article. [Link to Article 2]. Depending on the particulars of your portfolio, your and your spouse’s ages, and your retirement goals, we might consider withdrawing less than that amount at the beginning of retirement while the market adjusts. In other cases, we might recommend sticking with your withdrawal rate but putting more of that income into your emergency savings account and forestalling spending on the wants column. 

It’s also a good time to give your spending plan another once-over. Do any non-essential items jump out at you? Do you really read all those magazines or watch those streaming services you’re paying for every month? Will you keep going to that country club now that you’ll be travelling more and focusing more time on your hobbies? How much are you going to drive that extra car now that the kids are out of the house? Speaking of the kids … why are they still on your cell phone plan? 

Ironically, how you handle these monthly expenses you might not think about much could have a bigger impact on your retirement plan than the scary market headlines you’re reading! 

2. Reconsider Your Investments  

As you get closer to retirement, we will be making carefully considered adjustments to your investments. For most folks, that means gradually moving money away from the markets and into more conservative investments.  

But we don’t recommend abandoning the markets completely. As we’ve discussed, it’s best to use a very wide perspective when making a financial plan.  

Yes, as you get closer to retirement, that lens narrows from fifty or sixty years to twenty or thirty. But over the course of your retirement, we want your assets needed in your later years of retirement to grow as we seek to offset inflation, taxes and the threat of big health bills. 

One approach to this is what we call segmenting your assets or bucketizing them based on timing and income needs broken out over your 25 to maybe even 35 years in 5-10 year increments. This can aid you in finding the right mix of investments to help ease and manage the next full blown correction and each subsequent market drop. If you want to better understand how to this strategy works, click here.

3. Earn More or Delay 

Many new retirees find that taking a part-time job gives their days more structure and their lives more meaning. This might be the perfect time to take that non-profit job you couldn’t afford to work when you were raising a family. Teach, tutor, or give seminars that bring your professional expertise to a paying audience. Become a consultant. Or start your own dream business.  

The extra income will make you feel a little more secure. Plus, the activity and engagement with other people could become the foundation of a rewarding retirement.  

4. Keep Living Your Best Life! 

If the key to a fulfilling life was only about earning money, then no one would ever retire. And if the key to a fulfilling retirement was only about having enough money to pay for essentials, then managing market volatility would be easy. But living the dream can take many more resources. 

So if you find yourself thinking: Cancel vacation! Sell the lake house! Get a refund on those golf lessons! 

Please, know you don’t have to panic if you have a well thought out plan. Especially one that thoroughly delves into how to plan for your best Return on Life. Our process includes this and if you want to learn more click here. 

The things you want to do, and the people you want to do them with, ARE the essentials to living your best life possible in retirement. Even if we decide to trim your budget or rebalance some of your assets, you deserve to enjoy yourself, no matter what the Dow Jones Industrial Average says.  

Set up that free 15-minute call now! We are just a short conversation away from helping ease your mind about how to view what’s happening in the markets with true perspective so we can get and keep you on track for a long and happy retirement.  

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The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

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