Nest Eggs and Bear Markets

If your retirement is near or, in fact, here, you’re probably concerned about how to cope in today’s bear market.  And if you are one of the almost 40 percent of investors age 56 to 65 whose retirement planning led them to invest too heavily in equities–and who the Employee Benefit Research Institute says now hold about 80 percent of their wealth in stocks–you’re probably downright worried.

But it may be comforting to learn that yours is not the first group of retirees to cope with bad timing in addition to decision making under uncertainty.  It should be helpful to take a look at the strategies that helped other bear-market retirees deal successfully with tough conditions.  The investment firm T. Rowe Price recently did a risk analysis study of investors who retired into earlier bear markets.  Their decision evaluation pinpointed strategies that allowed these retirees to stretch their savings over a thirty-year period.  According to their findings, the worst decision a retiree can make is to sell stocks when the market has bottomed out, and the best decision is to hold on to stocks and adjust plans for withdrawing funds.

One obvious way to reduce withdrawals is to continue or resume working, but there are others, and a tactic that the investment firm’s Monte Carlo software found to give an investment fund an 89 percent probability of lasting thirty years is much less drastic: take withdrawals but do not increase your withdrawals to adjust for inflation until the market rebounds. This won’t be painless, but it will allow you to cash in later on the growth of the stocks you hold now.

For one columnist’s more detailed advice on negotiating a bear market after retirement, go to

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