Bear markets are part of the peak-to-trough cycle and can’t be stopped. According to Hartford Funds, since 1928, there have been 26 bear markets and 27 bull markets. Since up and down cycles are almost exactly even, the only good retirement plan is one that prepares you to leave the workforce during either.
Anne Lester, who worked for 29 years as a portfolio manager and head of retirement solutions for JPMorgan Asset Management’s Solutions group, said, “There will always be bear markets.” “If the success or failure of your retirement plan depends on the market being good when you retire, it may be a sign that you need to rethink your plan, which could mean working longer so you have a bigger nest egg.”
If your portfolio was doing great on your last day of work, that would be great, but if you invest for 50 years, you can expect to go through 14 bear markets.
Do you have enough money to take a few years off?
From a historical perspective, bear markets happen just as often as bull markets, but they don’t last nearly as long. Hartford Funds says that the average bear market lasts about 9.6 months, or 289 days. On the other hand, the average bull market lasts 991 days, or about 2.7 years.
Not only do bear markets last much less long than bull markets, but the lows are also not nearly as low as the highs. In a typical bear market, stocks lose 36%, but they gain 114% on average in a bull market.
That means that if your retirement date falls during a downturn but you have enough savings to get by while you ease into retirement, you probably won’t have to wait too long for your portfolio to bounce back. Then, when you wake up, you can start drawing from it.
“Retiring in a bear market isn’t always a bad idea,” Lester said, “if you have a comfortable cushion and can handle the first few years of retirement without having to sell off your portfolio while the markets are down.” ” It can be helpful to look at things from a “cash flow” point of view. That is, do you get enough money from Social Security, annuities, deferred compensation, or part-time work to live the way you want to live? If so, it might be okay to retire during a bear market.
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