What To Do if You Retire in a Bear Market

Financial advisor explaining paperwork to elderly retired couple front of desk.
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Retiring during a bear market isn’t ideal, but it’s not the end of the world either. If you worked hard and sacrificed during your career to build a retirement nest egg, there are steps you can take to help protect it if it falls prey to a bear market.

In fact, although it may not seem like it, retiring during a bear market can actually prove to be an opportunity, even if it causes pain in the short term. Here are some ideas you can use to maneuver your way through a bear market at the start of your retirement.


No one likes to feel the pain of a 20% or more drop in their portfolio value, but even for recent retirees, these types of selloffs can have a silver lining. The truth is that for the average 65-year-old retiree, life expectancy is nearly 23 years, according to IRS tables. Over that long of a time frame, the stock market is highly likely to recover and go on to new highs, as it always has after past bear markets. While past performance is not a predictor of future results, over a two-decade span, recovery is highly likely. 

This is where the opportunity comes in. Recent retirees can take advantage of a bear market drop to reinvest existing funds into the market while it remains at low levels. Tax refunds, windfall payments and even pension or Social Security payments that exceed what you need to live on can all be funneled into devalued retirement accounts. If a bounce occurs, you’ll earn back even more money than if you just kept your portfolio at current levels. 

Are You Retirement Ready?

Restrict Withdrawals

Certain retirement accounts, such as IRAs and 401(k) plans, have mandatory minimum distributions that you must take after you reach age 72. However, if you recently retired and are not yet at that age, nothing is forcing you from taking a withdrawal.

Ideally, you’ll want to avoid distributions whenever possible during a bear market, as you’ll be essentially locking in the losses on your portfolio. If you can afford to live off other income during this time, it’s best to avoid selling any securities at a big loss just to withdraw the money.

If you are 72 or over, however, and are forced to take distributions, try to limit your withdrawals to the absolute minimum required. Over time, you can take larger withdrawals, after the market recovers, to cover any shortfall you may have.

Partition Your Short-Term Money

One caveat to the “avoid all withdrawals” mantra is that you may have to partition your funds and take a withdrawal for your short-term needs. While it’s unfortunate that you might have to sell some stock while the market is down, in some cases, it’s just necessary.

The strategy here is to only take out the amount that is absolutely critical for your survival. If you can leave the bulk of your portfolio intact, it’s likely to recover over time, and then it should once again be sufficient for your long-term needs.

Rebalancing After the Bear Turns Into a Bull

Retirees, and indeed investors in general, often underestimate how they react to risk in their portfolio. If suffering through a bear market at the start of your retirement put a scare into you, perhaps it’s time to dial down some of the risk in your account.

Are You Retirement Ready?

You should still maintain an equity allocation to help grow your portfolio over the two or more decades you’re likely to enjoy in retirement. However, consult with your financial advisor about how to create a balanced portfolio that both provides you with the growth and income you need to fund your retirement, but that still allows you to sleep at night when markets get antsy.

The Bottom Line

Bear markets are unpleasant for any investor to go through, but for retirees, it can put their savings in jeopardy. The best way to prepare for bear markets in retirement is to try to manage the risk in your portfolio as you near the end of your working career.

If you are already at the brink, however, reinvesting, restricting withdrawals and partitioning money for short-term needs can all help get you through it. Try to avoid any emotional decisions when things are bad because time and time again, bull markets emerge after bear markets.

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