How to Make Your Retirement Bear Market-Proof

How to Make Your Retirement Bear Market-Proof

Four Steps for Surviving a Market Meltdown

How to Make Your Retirement Bear Market-Proof
Wednesday, 13 November 2019

The past decade has been kind to recent retirees – they’ve benefited from a bull market that quite possibly increased their net worth even though they’re no longer working. Of course, not all retirees will be this lucky.

Since the market is always in flux, some retirees will find themselves in the unfortunate predicament of retiring into a bear market that’s about to show its teeth. However, all hope is not lost. Here are four steps you can take to help ensure your retirement is bear market-proof.

1.     Take Stock of Your Budget

The ebbs and flows of the market can make us feel powerless at times, with Wall Street maintaining more control over our money than we do. This is an unsettling feeling, particularly if you’re newly retired or will be retiring soon.

Here’s a truth that may set your mind at ease: the single most powerful influence over your financial plan is how much you choose to spend and how much you choose to save.

If you’re new to retirement or on the cusp of taking this step, your budget is likely already set based upon your annual withdrawal rate. If the next bear market is rearing its ugly head, it’s a good idea to consider changes to your budget strategy. While every retiree’s situation will be a bit different, it might be wise to consider withdrawing less than anticipated at the beginning of your retirement while the market is adjusting. Or, it may make sense to continue with your planned withdrawal rate but to bulk up your emergency savings.

This is also a good time to review your budget line by line. Are there non-essentials you can cut until the market stabilizes? Are you paying for monthly services you aren’t really using? Is it time to get your grown children off your cell phone plan? Ask yourself tough questions about every dollar you’re spending, so you can keep a leaner budget for the duration of a bear market. In truth, these “small” monthly budget decisions could have a larger impact on your retirement finances than any market changes ever will.

2.     Consider Adjusting Your Investments

As retirement approaches, the majority of people begin slowly moving their investments away from the markets in favor of more conservative investments, like bonds. However, it is usually not a good idea to abandon the market entirely.

In financial planning, it’s best to take the long-view. Sure, as you age and approach retirement, that window narrows. However, you want to ensure that your assets continue to grow, and having a stake in the market tends to be a critical part of that growth. It’s all about finding the right investment mix for your individual needs.

3.     Continue Earning

Many new retirees ease the transition into full-time leisure by working part-time. This has the benefit of providing more structured days and meaningful social connections, but it can also be important financially during a market downturn. Extra income can help you feel more secure, and there are many ways to put your skills to good use: you can teach, consult or even start that business you’ve been considering for years.

4.     Keep Enjoying the Life You’ve Built

You want more out of retirement than simply paying the essential bills, right? Of course! If you’re facing a bear market, don’t fall prey to knee-jerk reactions like selling that dream vacation home you just purchased or canceling the trip you and your spouse have been looking forward to. The key to a truly fulfilling retirement isn’t just the ability to pay your bills, it’s the decision to live your best life – the one you’ve worked so hard to build. Market volatility is something to pay attention to, and it may necessitate a rebalancing of your assets or a trimmer monthly budget, but don’t let it derail your ability to enjoy retirement.

If you want to stay on track for a long and happy retirement, consider taking these four steps to protect your finances in the event of a bear market.

About the Author

Carroll W. “Bill” Hayes

Carroll W. “Bill” Hayes

Carroll W. “Bill” Hayes, MBA, CFP® Mr. Hayes started his financial career at Merrill Lynch in 1989. In 1992, Bill left Merrill Lynch for Fidelity Investments. During his career at Fidelity Investments he held roles in various divisions of Fidelity. Those roles included positions in the Trust, 401(k), Brokerage, and Money Management divisions. Bill held management positions at Fidelity and in 2001 led a Private Access team based in Boston. In the Private Access role his responsibilities included managing a book of business in excess of $3 Billion and a client base that was international in scope. 

In 2008 Bill established Charles Carroll Financial Partners. The firm is an Independent FeeOnly Financial Planning and Investment Management firm. Charles Carroll Financial Partners embraces its fiduciary responsibility to its clients. 

Bill is a graduate of Marquette University, and holds an MBA from the Sawyer School of Management. Bill holds the designation, CERTIFIED FINANCIAL PLANNER, and currently presides as a Commissioner on the Disciplinary and Ethics Commission of the Certified Financial Planner Board of Standards. Bill resides in Massachusetts with his wife Christine and travels up and down the East Coast meeting with clients of the firm.

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