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The Market Is Down – Can I still Retire?

We hear variations of this question often. Sometimes it sounds like this instead: “What if the market goes down after I retire?”

Concerns about bear markets during retirement are common and can be exceptionally prominent for clients who have not yet made that leap. The third quarter of 2022 closed on Friday, and markets have not been kind to portfolios this year. In addition to the overall downturn, markets have bounced around this year; the market volatility we have seen so far in 2022 has been downright dizzying, making even the most steadfast investor nervous.

The 20-year average daily move of the S&P 500 is +/- 0.8%; the Year-to-Date average daily move of the S&P 500 is +/- 1.2%. Recency bias leads our brains to place greater importance on recent events over historic ones; we start to believe that what is happening now will continue indefinitely. When we step back, we realize that what is happening right now is just a small portion of the story. While the volatility we are seeing right now is more pronounced than “average”, financial planning accounts for situations like this.

As part of our financial planning process, we utilize a Monte Carlo analysis that tests your retirement budget, longevity, and other planning inputs against a variety of market returns. Your plan is specifically designed to weather periods of market volatility, and our investment team designs diversified portfolios to dampen the volatility in our clients’ portfolios compared to overall markets.  

Taking distributions in a market downturn affects future compounding, but with the right plan in place, it doesn’t have to derail your retirement date. Focus on the pieces within your control if you are looking to lessen the impacts of retiring in a down market, such as cash flow planning and cash management. With a good plan in place, you can channel your energy into golfing in the sun, traveling, and waking up whenever suits you.

How to lessen the impacts:

Before looking to lessen the impacts of taking distributions, ask yourself: “Do I really need to lessen the impacts?” “How sensitive is my plan?”  If your plan incorporates all your spending goals and is still successful even at a market low, then you should be able to turn in your retirement paperwork with confidence. If you find that your planned retirement budget doesn’t give you enough wiggle room for comfort, here are a few things to consider and talk about with your advisor:

  • Buffer cash within your retirement accounts for your monthly withdrawals. If you are a client of ours, you’re ahead of the game because this is done for you. We raise cash periodically to fund your monthly distributions. This gives some flexibility to the timing of selling positions.
  • Go into retirement with built up savings. We typically recommend a good cash reserve account as your emergency savings. Like buffering cash for your monthly withdrawals, this allows you to pull from your reserves for larger expenses and pay yourself back over time.

    • Consider if you can delay or decrease withdrawals without delaying retirement. If you have reserves built up, you may want to talk to your advisor about using reserves to cover retirement expenses for the short term. Start withdrawals down the road and look to replenish your savings.

Trust the Plan:

The market we are experiencing today is unlikely to continue throughout your retirement and investing horizon. Remember, markets can turn quickly (think COVID). The market today may not be the one you see in January when you’re looking to begin your retirement withdrawals. The Monte Carlo analysis we perform in our retirement planning is a stress test to simulate bear market conditions and your plan was built to meet your goals and weather storms like this.

Kelsey Rising
Associate Financial Advisor


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