Bear Markets In Retirement

Bear markets can feel a lot different when you’re retired and are no longer earning income from work, especially if this is your first bear market since you stopped working. When you were younger, you had time on your side. You may have even seen drops in the market as an opportunity because it gave you additional time and you got to purchase more shares while things were on sale, so to speak.

The relationship between your money and your accounts now is of money going out versus money going in, to put it simply. You may have noticed that there’s this psychological component around money and not wanting to mess things up. The decisions we make carry much more weight now when we’re close to or in retirement.

What led to your investment success the last 30 years is a lot different than what’s going to lead to success the next 20 or 30 years, or that’s at least what we’ve been seeing at Streamline Financial since we’ve been around. I want to share how to endure bad markets if you’re close to retirement, and what you can do to actually take advantage of this if you’re already retired – even if you’re no longer saving money. 

Newton’s Third Law of Motion

There is a universal law of physics that we can actually apply to our retirement. Newton’s third law of motion states that for every action, there’s an equal and opposite reaction. The way I see it, there’s a positive to every negative and vice versa. I want to share what the positive is to take advantage of during bad markets. 

Getting Through Bear Markets

The first thing we need to be aware of is that in the previous 30 years, there were four bear market corrections (a drop of 20% or more). The 30 years before that, there were a total of five bear market corrections. We need to expect these bear markets to happen during our retirement (the next 20 or 30 years).

The second thing is we don’t want to make a change based solely on emotion. We were just talking to someone yesterday about how emotions can cause us not to take action when we know doing so is actually the smart financial thing to do. For instance, during March of 2020 it wasn’t easy to rebalance your accounts, but if you followed through and did the correct rebalancing system or strategy and you were to look back now, it could have made a lot of sense.

Lastly, start with your income plan because that helps guide us and make really good planning decisions around our investment plan. Updating your income plan during bad markets can also give you some confidence as well as you’re looking at where we are today and then looking at over the next few years and seeing that things maybe aren’t as bad as it might seem.

How to Take Advantage of Bear Markets

This takes us back to that law of polarity we mentioned earlier. Idea number one to think about is tax-loss harvesting. That could be a way to write off some of the losses while still keeping your investment strategy intact. One thing to really pay attention to when we’re talking about tax-loss harvesting is that wash-sale rule.

The second thing that could be a possible opportunity is the ability or option to lock in higher yields in that conservative bucket. You’ve seen the bucket strategy on here before where you have the possible three buckets, and having that conservative bucket is a great way to plan out and prepare for bad markets. At the time of this recording, some of those historically conservative asset classes are paying a higher interest, a higher yield, than what we’ve seen really over the last decade which could be a silver lining during this period of time.

Those are just two things you could potentially take advantage of. If you’d like to talk more about your plan, feel free to reach out. We don’t always have space available but you’ll hear back from us either way. See you in the next video!

Investment Advisory Services offered through LaSalle St. Investment Advisors, LLC, a SEC Registered Investment Advisor (LSIA). Securities offered through LaSalle St. Securities, LLC (LSS), a Broker/Dealer and Member FINRA/SIPC. LSS is a Subsidiary of LSIA.  Streamline Financial Services is not affiliated with LSS or affiliates.  Investing involves risk, including loss of principal. This video content is not a recommendation to buy or sell specific securities or investment company products.  Any third party software future performance and/or projection services are neither provided nor endorsed by LaSalle St. Securities, LLC LSS affiliates, or Streamline Financial Services.

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