Bear Markets and Your Retirement

By Dean Barber

May 9, 2019

Let’s imagine that you are 60 years old, and you’ve saved well. You’ve got a good amount of money in your 401(k). You know that you’re going to have your Social Security and your spouse is going to have their Social Security. You save some money outside the 401(k). You’ve enjoyed a good, nice run in the markets, and it’s October of 2007. The bear markets of the Great Recession is around the corner.

Recessions and Bear Markets

You’re two years from your target retirement date. By March of 2009, your 401(k) and your investments are valued at 60% of what they were 18 months earlier. You’re only six months away from your target retirement date. What are you going to do? Reality sets in.

You’re going to retire in six months, but you don’t have the money to do it. You sit down, and you look at your budget. And you say, “Is there a way that we could live on less?.” And finally, you say, “You know what? I’m going to have to work longer.”

Who’s to Blame?

If that happens to you, it’s not the fault of the banking system, greed on Wall Street, the 401(k) plan provider, the underlying investments, or the Federal Reserve! The fault lies squarely on your shoulders. Because in the world that we live in today, we have the ability to analyze a portfolio. We can take it back through prior bear markets, and understand how that portfolio could react is so simple for us in the financial planning world today. And we can apply that to the overall retirement plan. And not only understand what the portfolio might do, but know how it impacts your plans for the future.

So, if something like that happens to you, it’s your fault. It’s not anybody else’s fault. It’s not the President’s fault, and it’s not Congress’s fault. You can’t point the finger anywhere, except for yourself.

Understand Your Portfolio Risk During a Bear Market

What I’m saying is, if you don’t understand the downside risk associated with your portfolio, as well as the upside potential, it’s incumbent upon you to know that now we can show you that information.

Here’s the problem. And I say this is a problem, and it’s not a huge problem. But the problem is that bull markets are long and protracted, for the most part. They last for long periods, but we get these little corrections, you know, 5%, 10%, 5% will happen a couple of times every year. Every nine to 12 months, you’ll get a 10% or more correction. And you don’t know if one of those corrections is going to turn into a bear market. So, you not only have to pay attention to the corrections, but you also have to pay attention to the potential that that correction turns into a bear market.

The idea is that you fully understand with both eyes wide open precisely what a bear market could do not just to the value of your portfolio, but to your ability to retire. And if it’s not acceptable to you, then you need to make changes to your portfolio into a strategy that is acceptable for you.

Analyze Your Portfolio for a Bear Market

I know this, we’ve lived through major bear markets, and we’ve helped people through major bear markets. It’s not too late. This is the time when you need to analyze what you have today and understand the potential devastation that can await you in a bear market. If you’re ready to see where you stand, we recommend you do request a meeting for a portfolio analysis.

We’ll look at exactly what you’ve got today, and backtest that through bear markets in the past. This will give you a likely scenario, and you can then say, “Oh my gosh, that’s too much risk!” or, “You know what? That’s about what I figured; I’m cool.” Either way, we’re going to do this analysis for you without cost and without obligation. So reach out to us either by phone at 913-393-1000 or schedule a complimentary consultation below and ask for a free portfolio analysis.

Make sure to catch the episode Recessions and Bear Markets on America’s Wealth Management Show where Bud Kasper and I examine bear markets and recessions and what they mean to your retirement. You can find it on on your favorite podcast apps like Apple Podcasts or Stitcher, just subscribe!

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Investment advisory services offered through Modern Wealth Management, Inc., an SEC Registered Investment Adviser.

The views expressed represent the opinion of Modern Wealth Management an SEC Registered Investment Advisor. Information provided is for illustrative purposes only and does not constitute investment, tax, or legal advice. Modern Wealth Management does not accept any liability for the use of the information discussed. Consult with a qualified financial, legal, or tax professional prior to taking any action.