How Can Retirees Prepare for and Survive the Next Bear Market?

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!

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 — a condition in which securities prices fall from recent highs amid negative investor sentiment.

Here are four things you can do right now to help ensure you survive a market meltdown that occurs during your retirement years.

1. Review your budget.

Market corrections make us feel powerless. Wall Street or events on 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.

It’s important to 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 budget should already be set. Depending on the particulars of your portfolio, you and your spouse’s ages, and your retirement goals, you might consider withdrawing less from your investments (or none at all) at the beginning of retirement while the market adjusts. In other cases, you might stick with your withdrawal rate and put more of your income into your emergency savings account.

Take this time as an opportunity to review your budget:

  • 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?
  • Are you going to keep going to that country club now that you’ll be traveling 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?

Ironically, how you handle your monthly expenses 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, you should be making carefully considered adjustments to your investments. For most folks, that means gradually moving your money away from the markets and into more conservative investments such as government bonds.

That doesn’t mean you should abandon the markets completely.

It’s best to use a very wide perspective when making a financial plan. As you get closer to retirement, that lens narrows from fifty or sixty years to twenty or thirty. Over the course of your retirement, your assets should continue to earn income for you and keep you comfortable. The right mix of investments makes that happen during this correction and the next one.

3. Earn more.

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. Start your own dream business.

The extra income will make you feel a little more secure. 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 earning money, then no one would ever retire. In reality, the key to a fulfilling retirement is having enough money to do what you want while handling market volatility. 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.

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