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Retiring in a Bear Market: What to Know

With both stock and bond markets down so far in 2022, it’s an unsettling time for many new retirees and those considering retiring soon. Watching your retirement nest egg, that you will depend upon to fund part of your retirement, lose value can be disconcerting, to say the least.

Understanding a Bear Market

We have all heard of corrections, bear markets, and recession down-turns, but what are the differences between these terms?

  • A correction is when the stock market drops 10%+ from a recent high. This typically occurs once every 12-18 months and usually recovers within months.
  • A bear market is a 20%+ drop in the stock market from a recent high. It typically takes about 1 year for markets to recover from a bear market, unless the bear market leads to a recession. There have been 14 bear markets (including the current one) since WWII, and only 4 bear markets did not result in a recession.
  • A recession is a significant decline in economic activity lasting more than a few months. Since 2000, the S&P 500 Index dropped an average of 38.6% during recessions, while the NASDAQ dropped an average of 41.17%. It took an average of 2.5 years to recover .

5 Things to Know about Retiring in a Bear Market

Now that we are in a bear market and there is a lot of talk about a possible recession on the horizon, what should new retirees (or the soon-to-be retired) do to help protect their assets?

1. Keep Cash at Hand

Most retires will utilize monthly draws from their investment accounts to supplement Social Security, and other income sources. It’s important to keep at least one years’ worth of spending in cash so as not to be forced to sell investments during a down market. For example, if you normally take out $4,000 each month from your investment accounts and plan to take a $10,000 vacation in the next year, you would want to keep at least $58,000 in cash ($4,000/month x 12 + $10,000).

2. Reassess your Asset Allocation

Most new retirees tend to have a moderate level of risk in their portfolio, typically ranging between 40% and 60% in equities. It is important to note that an investor should have at least 5 years of spending in fixed income (i.e., bonds and cash), so that the equity allocation of their nest egg does not need to be touched for at least 5 years and their portfolio has time to recover from a downturn. Of course, as one goes through retirement, this equity allocation would also need to be decreased to better protect assets and produce additional income.

3. Wait On Those Big Expenses

In a down market, stay flexible. If you can wait on a large expense (i.e., new automobile, vacation, home remodel), then it’s best to wait until the stock market recovers. When you sell assets in a down market , remember that you are locking in any losses, but if you wait until the down market has passed, your portfolio could have an opportunity to recover and you could sell holdings at a potential gain.

4. Consider Working One More Year if You Have Not Retired

My clients are amazed when I show them what a huge impact waiting just one more year to retire can make to their financial plan. Not only do you save money for one more year, but you also gain another year of funds invested in the market potentially earning a profit as well as one less year of retirement expenses.

5. If You Have Already Retired

Consider a part time job. Many retirees find working part-time brings purpose, socialization and intellectual stimulation that is sometimes missing once they are fully retired. Most importantly, in a bear market, a part time job could help build cash reserves so you don’t have to lock in losses by selling any of your investments.

Knowledge is Power

Remember, it is natural for markets to go down. Every useful retirement plan should have an analysis done that accounts for bear markets and recessions. Financial markets are up far more years than they are down, so you can end up ahead if you have more time. Market downturns eventually provide amazing opportunities for investors, as most large market upswings occur in the middle of a recession as markets anticipate its end in sight.

For investors who have a financial advisor, you are already on the right track to secure your financial future. If you don’t have a relationship with a financial professional, contact us today.


  • Caporal, J. (2022, Jun 2022). Stock Performance in Every Recession Since 1980.
  • Shaban, H, Telford, T. and Gregg, A. (2022, Jun 14) The stock market is in bear territory. What does that mean?
  • Russell, K. and Grocer, S. (2020, Mar 3) Do Recessions Always Follow Major Stock Market Downturns?

Author Profile

Donna Zinman

The Author: Donna Zinman

Donna Zinman is a Principal and Senior Financial Advisor at Capital Advantage. She is a Chartered Retirement Planning Counselor (CRPC®) and an Investment Advisor Representative. As a Senior Financial Advisor, she is part of the investment team and is responsible for establishing new client relationships, managing investment portfolios and financial planning, as well as firm marketing and human resource management. Donna specializes in working with women in transition: about to retire, newly retired, widowed or divorced.