Can I Still Retire in a Down Market?

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Video Transcript:

Even when markets are strong, the fear of poor market performance at retirement or immediately after retirement can cause a person to belabor their retirement decision for years. But here’s the truth of the matter. Bear markets happen all the time – on average once every four years. This means that during a typical retirement of 25 years, an individual is likely to experience at least six down markets. So perhaps it’s not a matter of picking the perfect time to retire – it’s about having a process to manage your investments in any market condition.

Down markets, and volatility in general, is the price you pay for earning long-term returns. If you’re prepared for this to happen and you have a solid financial plan in place, it can help reduce your fear of the inevitable!

Here’s how I like to approach this issue with my retiring clients. First, I try to understand what “market risk” really means to them – what specifically is it about a down market that worries them? Having that context helps me know what to focus on as I present planning ideas.

Next, we review all available income sources (both now and in the future), and build a comprehensive net worth statement. This step feels a bit like gathering up all the pieces available for a puzzle. Retirement strategies can’t be built with missing pieces. Lastly, we use innovative financial planning software and our collective wisdom, to determine which allocation of stocks, bonds, and alternatives will help provide the highest long-term likelihood of success.

I always emphasize that this analysis is merely the flight plan, but in-the-air adjustments will be made. Financial planning software uses assumptions and diminishes the impact of actual human behavior. If expectations are set up front that individuals might need to reduce spending during down markets, but could increase spending during the good years helps to increase the plan’s probability of success.

Author Jakob C. Loescher Financial Advisor / Team Lead

In 2016 Jake was recognized by the Rockford Chamber of Commerce as one of 40 Leaders Under Forty. In 2023, for the sixth time in seven years, he was named on Forbes’ list of America’s Top Next Generation Wealth Advisors.

About Savant Wealth Management

Savant Wealth Management is a leading independent, nationally recognized, fee-only firm serving clients for over 30 years. As a trusted advisor, Savant Wealth Management offers investment management, financial planning, retirement plan and family office services to financially established individuals and institutions. Savant also offers corporate accounting, tax preparation, payroll and consulting through its affiliate, Savant Tax & Consulting.

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