Bear Market Strategies for Retirees

Financial planners often have to assist their clients during stock market declines, inflation, and uncertainty. In most cases, the advice is simple: Don’t react to short-term fluctuations in the market. For baby boomers who have already retired, the direction is different.

Those who take regular distributions from their accounts should avoid selling into bear market lows and locking in market losses, resulting in long-term portfolio damage. Baby boomers must protect their portfolios to make it through a bear market with minimal damage to their retirement savings.

To avoid making mistakes during a bear market, you should:

  • Make sure you don’t get out of the market.
  • You should have enough cash to survive a downturn.
  • Review your investment allocations.
  • Consult your financial planner.

Make sure you don’t get out of the market.

If you sell while your investments are down in value, you will lock in your losses. Financial advisor Brian Robinson, a partner with SharpePoint in Phoenix, says exiting the market is a terrible idea, and the damage it causes can be irreversible. When things turn around, it is important not to miss the gains when the stock market eventually recovers. If you’re sitting on cash, you’ll miss the first few days or weeks of positive gains, which is huge.

You should have enough cash to survive a downturn.

Keep enough cash or cash equivalents in your account to weather the downturn. When a bear market occurs, you might have to sell your investments for cash in order to pay your living expenses. According to Robert Gilliland, senior wealth advisor at Concenture Wealth Management in Houston, cashing in on investments during a bear market can be very detrimental.

In a down market, you shouldn’t have to sell assets. To cover retirement and living expenses, you should have three to six months’ worth of cash on hand.

Review your investment allocations.

It is an excellent time to review your asset allocation and financial plan if the stock market declines as it tests your risk tolerance. In a bear market, if your allocations are out of whack and you’re taking more risk than you’re comfortable with, Gilliland suggests making adjustments that will reduce the amount of risk. It is essential to evaluate your risk tolerance, and it is important to evaluate your holdings.

Consult your financial planner 

Consulting a financial professional may be a good idea when you are having difficulty staying the course and coping with stock market declines. It is important to sit down with your financial planner or advisor to review your plan and discuss possible outcomes, Gilliland suggests. What are your chances of success when the market turns around and goes up?

Your financial adviser can help you develop an investment plan that you can live with and explain the potential for losses and gains. Gilliland says it enables you to avoid making emotional decisions, which are often wrong.