“I’m scared to retire into a bear market”

[Anonymous]

I see this sentiment a lot on this board and other places. People afraid that the market will start declining just as they begin drawing down assets.

Why are people so afraid of this? Unless you plan to die 2 months into your retirement, you will likely experience a bear market during retirement at some point. It could happen at the beginning, middle, or end of your retirement, or it could happen multiple times during your retirement. In the US we have had six bear markets since 2000 and three since 2020 of varying lengths and severity.

Why are people so terrified of it occurring at the very start of retirement as opposed to some other point in retirement?

[Anonymous]

It’s bad to have a bear market at the start of your retirement if you don’t have a ton of money. You are forced to sell some assets to live when market is down and then have less left invested as market rebounds. This matters less if you have a lot of money.

[Anonymous]

See here - https://www.schwab.com/learn/story/timing-matters-understanding-sequence-returns-risk

Generally speaking - a bear market early in your retirement is MUCH worse that a bear market late in your retirement.

[Anonymous]

These bears markets that you are talking about are not really bear markets. They are just corrections during the bull.

Bear market is like when you are looking at zero percent returns for 10+ years.

[Anonymous]

They planned on annuitizing.

[Anonymous]

Anonymous wrote:These bears markets that you are talking about are not really bear markets. They are just corrections during the bull.

Bear market is like when you are looking at zero percent returns for 10+ years.

A bear market is when the market drops 20% or more.

What you’re referring to is either a depression or at least the Great Recession.

[Anonymous]

Anonymous wrote:It’s bad to have a bear market at the start of your retirement if you don’t have a ton of money. You are forced to sell some assets to live when market is down and then have less left invested as market rebounds. This matters less if you have a lot of money.

++1

This is a very big issue when it comes to retirement planning and the reason why you hold bonds and/or have a flexible withdrawal strategy during retirement.

You can have two investors that are identical except for the date they retire and one will be broke in 30 years and the other will have 5-10 mil. It just boils down to luck.

[Anonymous]

Anonymous wrote:

Anonymous wrote:It’s bad to have a bear market at the start of your retirement if you don’t have a ton of money. You are forced to sell some assets to live when market is down and then have less left invested as market rebounds. This matters less if you have a lot of money.

++1

This is a very big issue when it comes to retirement planning and the reason why you hold bonds and/or have a flexible withdrawal strategy during retirement.

You can have two investors that are identical except for the date they retire and one will be broke in 30 years and the other will have 5-10 mil. It just boils down to luck.

+1 DH has been pulling gains from his retirement into a high yield MMA starting this past year. He is 60 and was laid off.

I am starting this year based on the balance end of Dec 2024 before the market crashed (thanks, Trump). I hope to retire in 2 years.

A bear market is exactly why we are doing this. I want to make sure that we have liquid assets not in the market to pull from during the bear market periods.

We also have $300K cash in that MMA separate from the retirement accounts.

[Anonymous]

They last under way under two years. Take two years of expenses out if you are scared and all good.

[Anonymous]

We both retired 4 years ago at 55. I just checked my retirement accounts and it's up 35% since then.

[Anonymous]

Average bear market takes 18 months to recover. So have two years of cash like instruments or reduce how much taken from accounts with “guardrails” strategy.

[Anonymous]

A diversified portfolio with at least a year's worth of living expenses in cash or the equivalent will do the trick. You just can't get greedy.

[Anonymous]

My retirement planning includes two years of expenditures in cash in a separate money market fund. That means when I retire I can tap into the cash fund for living expenses and not touch any of the investments. If I happened to retire in a bear market, the investments are not going to be touched at all.

If it's a normal to good market, what I will do is to live off the cash for the first year while withdrawing the following year's expenditures from the retirement investments, and so forth for each subsequent year. If the market goes south, I then I don't withdraw from the retirement funds (outside any RMDs) and live off the cash until the market starts recovering.

In summarize, I will always have two years' worth of cash in a cash account to cover the living expenses to ride out any bear markets and it also allows me to plan ahead more easily.

[Anonymous]

We’re planning on having 3-4 years of extra cash available to manage a bear market at the start of retirement. Best we can do

[Anonymous]

DH and I are looking to retire in the next 4-5 years. Best case scenario is the American public elects a new administration that is interested in re-building what has been destroyed, and our coast into retirement should be pretty robust. Fingers crossed America!