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Surviving a Down Market in Retirement

Surviving a Down Market in Retirement

October 14, 2022

Update your Financial Plan to Adapt to the New Reality

The best advice for investors who are still several years away from retirement is to ignore recent losses in your retirement and investment accounts, and just keep on saving.  In fact, for savers, down markets such as this one are an opportunity to pick up stocks and bonds on the cheap. 

But for those in retirement, or about to retire, it can be a different story.  When you are living off retirement account distributions, the math of “buy cheap and sell dear” is working in reverse during severe market downturns.  To fund retirement withdrawals under these market conditions, many retirees are forced to do the opposite and “sell cheap”.  Since most people are no longer investing new money in their retirement years, there is no upside to cheap stock and bond prices as there is for younger savers. 

Retirees have more stock exposure in their portfolios than in years past.  That’s understandable.  Ever since the financial crisis, interest rates on bonds, CDs, and other traditional “safer” investments have been so low that many were forced to buy stocks in order to have any income at all.  And in fact, owning more bonds in your portfolio wouldn’t have helped you much this year anyway.  Even normally safe bonds have taken a beating in this environment of rising inflation and higher interest rates.  We’ve managed risk better than most this year, but it’s still been a pretty ugly year for most all investors.  

So how does a retiree sleep at night? 

Well, first is DON’T PANIC!  I know, I know, when someone says “don’t panic” its usually time to panic!  But seriously, while it is hard to see your retirement portfolio shrink by six figures or more in a matter of months, this does not mean you need to be starting your career as a Wal Mart greeter!  It is all about the resiliency of your financial plan. 

There is also some age-old advice that says, “Just Don’t Look at Your Accounts”.  Well, I agree, to the extent watching every day as the market gyrates like a yo yo doesn’t do you any good, and only leads to anxiety and sleepless nights.  But ignoring the fact that your wealth may have decreased substantially over the past 12 months isn’t healthy either. 

What IS important to do is to take a fresh look at your financial plan and retirement spending assumptions given the new reality of your now somewhat smaller portfolio.  And if you are about to retire and haven’t yet put together your financial plan – then there is no time like the present.   What a financial plan update requires you to do is to look only at TODAY and make fresh projections about the future.  The value of your investments 10 months ago is completely irrelevant to the plan we create today.  We look at available resources, and create a spending, cash flow, and distribution plan that will be supported by TODAY’s portfolio. 

Depending on how much cushion was in your retirement plan, it may or may not be necessary to take remedial action, such as reducing spending plans for the coming year.  But it’s infinitely better to know that now and take action, than to hide your head in the sand and pretend everything is still the way it was in 2021!  

It may also be a good time to reconsider investment strategies.  The investment environment has dramatically shifted over the past 10 months.  Investments like fixed interest annuities, CDs, and government bonds that had been unappealing during the low interest rates of years past, are now looking sweeter than they have in years.   New “fee only” annuity products have come on the scene in the last few years that are very low cost, with customer friendly terms, and provide new and compelling features for managing investment risk.  These products actually benefit from high interest rates and market volatility. 

So, for all these reasons, now is really a great time to meet with your trusted financial planner.  To setup an appointment to review your plan (or create a new one) you can conveniently schedule an appointment using my calendar link at  There is no quota on the number of meetings clients can request – if you are feeling uneasy with all that’s going on, schedule an appointment and let’s talk about it.