What to Do If You’re Nearing Retirement in a Bear Market

The negative market reaction to the COVID-19 pandemic and ensuing economic slowdown might have retired Americans and those expecting to retire in the next five years feeling anxious. What do the news reports about entering a “bear market” mean for those with money for retirement invested in the stock market? Does the usual advice of “do nothing and ride out the fluctuations” still apply to this scenario?

The overall answer from financial advisors seems to be, yes. However, there are a few things you can consider and might do to ensure your immediate and long-term retirement needs are met.

  1. Make sure your immediate cash needs can be met. This means you can access cash for short-term, planned living expenses that isn’t subject to market volatility and won’t cost early withdrawal fees. Some financial advisors recommend having five years’ worth of expenses in cash or cash equivalents, such as short-term bonds, certificates of deposit and/or Treasury bills.
  2. Remember you are a long-term investor, even after age 60. You still need to think in terms of decades. If retirement were only concerned with the next year, you could go straight to cash the day you retire, but it isn’t. So, unless your expected day-to-day expenses drastically increase, your retirement budget and investment plan should be based on regular, planned withdrawals.
  3. Shift to safer assets. If you’re concerned your plan hasn’t adjusted for lower risk investments as you approach your target retirement date, speak with your financial advisor. Now might be a good time to rebalance and reassess your risk. You might be advised to sell bonds high and buy stocks low, but not in earth-shattering, plan-busting quantities. Remember the key term “balance.”
  4. Take other financial steps. The drive to act in the hopes of making a difference for your future is natural. If you’re advised to sit tight on your retirement investments, look to making other financial changes: pay down debt, add to savings, put more into your workplace retirement account if you’re still in the workforce.
  5. Don’t let emotions cloud judgement. This includes reactions to news headlines. Emotions like fear earn clicks and hours of TV watched, but emotions aren’t good guides for financial decisions.