Retiring in a Down Market? Don’t Panic

Market volatility makes most investors nervous, but a big downturn can be especially disturbing to those who are approaching retirement or newly retired. If you’re in that position, it may help to keep these ideas in mind.

Retirement Is Long

During your working career, you may look at retirement as the end of the investment process, but your retirement could last 20 or 30 years or more. So even if the stock market is at rock bottom on the day you retire, your investments may have many years to pursue growth as the market recovers.

You might shift to a more conservative allocation as you near retirement, but you cannot be too conservative if you want to keep up with inflation. Whatever balance you choose, the equity portion of your portfolio can pursue market growth throughout retirement while bonds or similar investments provide income. In both cases, time is on your side.

Don’t Stop Investing

Although a down market may be discouraging, it could be an opportunity to build your portfolio at discount prices. If you are contributing regularly to a workplace plan, IRA, or other investment account, you are practicing dollar-cost averaging. This may help smooth the effects of volatility and enable you to buy more shares when prices are down, putting your portfolio in a stronger position to grow when the market recovers. Reinvesting any dividends, capital gains, and interest income may also add shares to your portfolio at lower cost.

Sell Smart

The greatest challenge of retiring in a down market is that you may have to sell some investments at significantly reduced values, possibly at a loss. If you have been investing for many years, your investments might show substantial gains even with the downturn, but psychologically it’s still difficult to sell them for less than their value when the market was up.

Keep in mind that stock market losses remain on paper until you sell. If you don’t need money from your investments in the near term, you could wait for the market to recover before withdrawing funds. The SECURE 2.0 Act of 2022 raised the required minimum distribution (RMD) starting age for traditional IRAs and most workplace retirement plans to 73, beginning in 2023 (for individuals who reach age 72 after December 31, 2022). The age will rise again in 2033 to 75. You generally can avoid taking RMDs from a workplace plan as long as you are still working for the company sponsoring the plan. Original Roth IRA owners are not subject to RMDs.

Bulls and Bears

Since 1970, there have been seven S&P 500 bear markets — defined as a loss of 20% or more from a recent high — and seven bull markets, a gain of 20% or more from the bear market low. Bull markets typically last longer than bears, and the gains during a bull market tend to be significantly higher than the losses during a bear market.

Timeline of S&P 500 bull and bear markets since 1970

Average duration of bull markets since 1970 has been 2,288 days with an average market gain of 232.3%. The average bear market over the same time period was 472 days with an average market loss of 41.4%. Does not include bear market that began on 1/3/22. Bull market dates: 5/26/70 to 1/10/73; 10/3/74 to 11/27/80; 8/12/82 to 8/24/87; 12/4/87 to 3/23/2000; 10/9/02 to 10/8/07; 3/9/09 to 2/18/20; and 3/23/20 to 1/2/22. Bear market dates: 1/11/73 to 10/2/74; 11/28/80 to 8/11/82; 8/25/87 to 12/3/87; 3/24/2000 to 10/8/02; 10/9/07 to 3/8/09; and 2/19/20 to 3/22/20.

Source: Yardeni Research, October 28, 2022. The S&P 500 is an unmanaged group of securities that is considered to be representative of the U.S. stock market in general. The performance of an unmanaged index is not indicative of the performance of any specific investment. Individuals cannot invest directly in an index. Past performance is not a guarantee of future results. Actual results will vary.

If you do need money from your savings and investments, it might be better to spend down cash first, and then access funds from fixed-income investments, giving equities more time to recover. Deciding what and when to sell can be complicated, and you may benefit from professional advice. Although there is no assurance that working with a financial professional will improve investment results, a professional can evaluate your objectives and available resources and help you consider appropriate long-term financial strategies.

All investments are subject to market fluctuation, risk, and loss of principal. When sold, investments may be worth more or less than their original cost. Asset allocation is a method used to help manage investment risk; it does not guarantee a profit or protect against investment loss. Dollar-cost averaging also does not ensure a profit or prevent a loss. Such plans involve continuous investments in securities regardless of fluctuating prices, so you should consider your financial ability to continue making purchases during periods of low and high price levels.

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Matthew Englade

Matt graduated in 2008 from Southeastern Louisiana with a bachelor's degree in business. He started his career in financial services, working as a staff member with Delahaye and Associates, where he eventually became a partner.

In 2022 he formed Englade Insurance and Financial Services, where his primary focus is serving his client’s best interest. “But even if you should suffer for what is right, you are blessed.” 1 Peter 3:14

Matt is a resident of Central, LA and enjoys spending time with his wife, Angela, and three children. He also enjoys coaching middle school basketball and giving back to his local church.

Jacob Ashford

Jacob is currently a student at Southeastern Louisiana University and is studying in the College of Business as a Marketing Major.

Jacob pursues his career by working with Matt and Angela in their mission to spread financial sustainability with their current and future clients. He also donates his time to the Southeastern's College of Business by participating in numerous career services for the city of Hammond.

Having two younger sisters, Jacob understands the importance of protecting family values and leading a path to a secure future.

Nathan graduated from Texas A&M University Class of 2006 with a degree in Agriculture Leadership & Development. Nathan has been in public service as a firefighter since 2008. In addition he and Katherine have started, operated, purchased, and sold multiple small business’. Through his experiences; Financial Services has been a lifelong pursuit for Nathan and he is excited to be a resource for people like you, your family, and your business.

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Angela graduated from Southeastern Louisiana University with a Bachelor of Science degree in Nursing. She worked as a Labor and Delivery nurse for 14 years. She decided to continue her love for caring for others through helping people obtain financial health and wellness.

She joined Englade Insurance and Financial Services to guide Matt's clients on becoming aware of potential roadblocks and achieve financial peace of mind. In her free time, she enjoys spending time with her family and exercising.

Along with Matthew, she volunteers many hours to local charities to give back to the community.

Eve is happily married to her best friend Rick since 2012. They enjoy recreational trips like hiking and camping, visiting the beaches in the Gulf of Mexico, and trips to Walt Disney World. They are active in their congregation, donating their time and effort to help run the Audio/Visual presentations for services. She is grateful for all God has given her and believes all the glory goes to Him.

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