Why Bear Markets Can Be More Challenging During Retirement
Most investors understand that markets rise and fall over time. What many don't realize is that the timing of those declines can have a significant impact on retirement savings.
According to historical market data, bear markets have occurred approximately every 5.3 years since 1961. The average decline has been 33.7%, and recovering from those losses often requires a gain of more than 50% just to break even. While markets have historically recovered, the journey can be difficult for retirees who depend on their portfolios for income.
This is Sometimes Referred to as "Sequence-of-Returns Risk"
During a bear market, retirees may need to withdraw money from accounts that have temporarily lost value in order to cover living expenses. Those withdrawals lock in losses and reduce the assets available to participate in a future recovery.
For example, a portfolio that declines by 30% must grow by nearly 43% just to return to its starting value. If withdrawals are occurring at the same time, the challenge becomes even greater.
That's why many retirement strategies today focus not only on growth, but also on protection. Maintaining a portion of retirement assets in vehicles that help reduce exposure to market downturns may provide greater flexibility and confidence during periods of volatility.
Markets will continue to experience ups and downs. The key is having a strategy designed to help weather both.
Here to Help
If you're concerned about how future market downturns could affect your retirement income plan, let's schedule a conversation. Together, we can review your current strategy and explore ways to help protect the retirement you've worked so hard to build.
Reach out today to schedule an appointment.
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