Worried About Retiring During a Market Crash? 3 Steps to Take

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For investors of all life stages, the past several months have brought financial uncertainty, but this rings even more true for pre-retirees and the recently retired.

Taking steps to protect your assets during a market downturn can relieve some of the pressure and keep your nest egg a little more secure. Here’s what you can do.

3 Steps to Take If You Want to Retire When the Market is Down

1. Consult a Vetted Fiduciary

The first step may seem obvious, but Northwest Mutual found that only 29% of Americans take advantage of it: Speak with a financial advisor.1

A fiduciary financial advisor is obligated to work in your best interest, can help assess your current investment portfolio, risk tolerance and current market conditions to determine if your plan still aligns with your retirement goals.

Market fluctuations could have changed the calculus, and an advisor can help identify strategies to help make sure you don’t run out of money.

Even more important? They can help bring much needed relief from the stress of this year’s financial news and uncertainty.

The value of working with a financial advisor varies by person and advisors are legally prohibited from promising returns, but research suggests people who work with a financial advisor feel more at ease about their finances and could end up with about 15% more money to spend in retirement.2

SmartAsset’s no-cost tool simplifies the time-consuming process of finding a financial advisor. A short quiz helps match you with up to three fiduciary financial advisors that serve your area, legally bound to work in your best interest. The whole process takes just a few minutes, and in many cases you can be connected instantly with an advisor for a free retirement consultation.

Advisors are rigorously screened through our proprietary due diligence process.

2. Be Aware of Sequence of Returns Risk

Retirement savers should be aware of the sequence of returns risk, as it can wreak havoc on your retirement plans. Sequence risk is the danger that retirement withdrawal timing will have a negative impact on the overall rate of a portfolio’s return.

What ultimately determines your retirement portfolio’s results are the long-term average returns. But when you enter retirement and start making portfolio withdrawals, your portfolio’s value reflects market performance plus cash outflows. Combining an extended market crash with withdrawals can very negatively affect the outlook of a retirement portfolio.

Need help planning a retirement account withdrawal strategy? A fiduciary financial advisor can help you, and is obligated to work in your best interest. Click here to get matched with up to three fiduciaries who serve your area for free right now.

Empowering people to make smart financial decisions.


Empowering people to make smart financial decisions.

3. Consider Alternatives to a Short-Term Sell Off

Given the length of a recovery if the market dips near your target retirement date, there are multiple ways to guard against asset depletion.

For example, investors can avoid selling off assets in a down market by holding one to two years’ worth of planned withdrawals in cash.

Worldwide, high-net-worth individuals often keep 21-28% of their assets in cash or cash equivalents, with the percentage leaning towards the higher end of the range during times of market crisis.3 This also opens an opportunity for better buys when the market eventually improves.

Being flexible with withdrawal rates is also key to mitigating sequence risk. Investment research firm Morningstar analysts suggest withdrawing a fixed percentage of your portfolio’s value every year, not adjusting your withdrawal rate for inflation (i.e. not increasing your withdrawal percentage when inflation is high) or using a so-called “guardrail approach” where you reduce your withdrawal rate if it surpasses a set threshold.4

Speak With an Advisor to Devise a Short- and Long-Term Plan

With market conditions in flux, inflation at its highest in decades and rumors of a looming recession constantly swirling, making sure your financial plan is sound has never been more important.

That’s why we feel that it’s more important now than ever to review your retirement plan with a fiduciary financial advisor. Protecting your investments now could help ensure your years of planning pays off as the market eventually improves and prevent unnecessary long-term loss due to emotional, short-term decisions.

Not sure where to start? We created a free quiz to help Americans find vetted, qualified financial advisors who serve their area.

This quiz asks you a few questions, then matches you with up to three fiduciary financial advisors. You even earn a free consultation with each of your matches, so you can compare them and be fully prepared to pick a financial advisor.

Click Your State to Get Matched With Financial Advisors Who Serve Your Area
After you choose your state and answer a few questions, you can compare up to three advisors that serve your area and decide which to work with.
Take Retirement Quiz

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