4 Tips for Seniors and Retirees to Survive the Bear Market

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Why should seniors invest their money?

For the majority of 2022, we’ve been in a bear market; that is, a sustained decline of 20 percent or more of a major stock market index, including the Dow Jones and S&P 500. If you’re currently living off a 401(k), pension or other investment account, this downward trend is alarming, as your account balances have continued to shrink.

An analysis by First Trust examined every bear market since 1942 and found that bear markets, on average, last for about 11 months. Currently at ten months, the present-day bear market seems poised to last longer than this, a particularly nerve-racking scenario for those living on fixed incomes.

While no one can say for sure when the bear market will come to an end, there are some steps retirees can take to ensure the longevity of their investments.

FYI: To learn more about investing your money, read our guide to safe investments for seniors.

No. 1: Avoid Hasty Decisions

During a bear market, it’s easy to get scared and have the knee-jerk reaction to pull your funds out of the market; however, avoiding this urge is usually the best course of action. In fact, most investors take advantage of the bear markets and increase their portfolios and holdings while stock prices are lower.

While in a bear market, the average loss is about 34 percent, according to First Trust’s study, but then it’s usually followed by a bull market. A bull market is a tremendous opportunity to grow wealth, and the average bull market lasts for 4.4 years, with an average value increase of 155.7 percent.

During a bear market, you should only withdraw your funds from your investments in the case of an emergency.

FYI: If you’re planning to retire soon, read our guide to retirement.

No. 2: Create a Bucket Plan

Creating an investment bucket plan begins with determining your overall financial goals. Assessing your risk tolerance is vital, as is establishing a timeline for investing.

Once you have determined how long you plan to invest and what type of risk you are comfortable taking, you can begin to create your plan. Consider allocating your funds into three buckets.

This strategy will help ensure that you have funds available for short-term needs while allowing you to continue making investments with a longer-term horizon.

Research different investment options available and work with a financial advisor to determine the best strategies to meet your goals. Once in place, review your investment bucket plan regularly to ensure it's on track and progressing toward your financial goals.

No. 3: Assess Your Assets and Risk Tolerance

When assessing your assets and risk tolerance for investing, take the time to understand your financial goals, evaluate your current financial situation, and develop a strategy tailored to your individual needs.

It’s also wise to assess your risk tolerance by considering your investment experience, knowledge, and comfort level with risk.

Depending on your goals, your financial advisor may use tools such as asset allocation models, portfolio simulations, and stress tests to review your risk tolerance in-depth.

Additionally, it’s best to consider any tax implications, liquidity needs, and time horizons to develop a comprehensive investment plan. By assessing your assets and risk tolerance, you can ensure that your investments suit your goals and risk profile.

No. 4: Maintain Perspective

Remember what we said above: the average bear market lasts about 11 months, followed by a bull market that's great for growth. Based on the market's track record, it has always recovered, and those who waited saw increases in their portfolios or retirement plans.

It’s wise to work with a financial advisor as they have access to tools that can give a clear, concise projection of how the investments should perform.

In conclusion, don’t make any rushed decisions — just stay the course. The length of a bear market is generally less than that of a bull market, which will usually grow your wealth.

Choose a financial advisor with the tools and experience to give a personal comparison and projection that's best for your individual needs.

Additionally, if you’re looking for a cost-effective solution to retirement planning, check out our review of Retirable, a digital retirement planning platform.