Retirement Planning
Date: January 24, 2022

Gilbert Financial Advisor Explains How to Recover From Investment Loss Right Before Retirement

Have you ever heard of the “retirement red zone?” It’s the five- to 10-year period before retirement when your wealth is the most at risk – where one major down-swing in your portfolio could drastically shift the type of lifestyle you can afford in retirement. How can you make your money last a lifetime?

 No matter how much you prepare and calculate every step of your retirement planning journey, there’s one thing that’s completely out of your control: What the condition of the stock market will be when you retire.

 So, what do you do if your investments take a loss right before you hit retirement age? The key is flexibility. Here are some tips to consider:

When and Why This Can Happen

There have been 12 bear markets since World War II with the most recent ones occurring from 2000 to 2002 (Dot-Com crash), 2007 to 2009 (Great Recession), and 2020 (Coronavirus pandemic). 

Historically, bear markets last about 14.5 months on average and take about two years to recover. This is normal and expected and no cause for alarm. However, depending on how these odds play out, it means you could potentially retire at a time when your investments are experiencing a loss. 

What to Do When It Happens

Even if you retire at the cusp of a bear market, there are steps you can take to weather the storm and still have the retirement you imagined: 


It’s never too late to plan for the future. Schedule a conversation with the team at Watts Gwilliam and Company to see how we can help.


Talk to Your Financial Advisor in Gilbert

No matter how level-headed and confident you think you are, it can be hard to stay calm when you see your portfolio taking a nosedive right as you’re about to need it. And in times like these, it’s easy to shift into a scarcity mindset and want to pull everything out the second you see the stock market headed south. However, this is not the time to panic and make investment mistakes!

That’s where a financial advisor comes in. The right advisor can offer investment advice to help you stay calm when the market is in free fall, reevaluate your long-term goals, and chart a path forward. Think of them as your sounding board, the calm in the storm. If you haven’t done so yet, talking to a professional should be your first stop on this journey of recovering from investment losses.

Review Your Plans

When you’re planning for a long-term goal like retirement, flexibility is key (even if it’s right around the corner). You have to be able to roll with the punches and adjust your plan if something unexpected — such as an investment loss — happens right as you’re about to put the wheels in motion. 

Take a moment to review your retirement plans and see if there’s any way you can soften the blow you’re experiencing right now. 

For example, could you work a few more years? Remember, the average bear market takes two years to recover from on average. Working longer could give your portfolio time to recoup while also allowing you to fortify your savings a bit more (a double win). 

If you don’t want to do anything that drastic, you could also adjust your plans by finding ways to reduce your spending in the short term so you don’t have to withdraw as much from your portfolio year over year. The key is an investment strategy with flexibility.

Review Your Risk Tolerance with a Gilbert investment advisor

It’s easy to get more aggressive with your investments when the market is rising, but all it takes is one good free fall to bring you back to reality. If you’re not able to sleep at the thought of your investments taking a loss right before retirement, consider reviewing your risk tolerance. 

The key is to strike a balance between protecting your money now and growing your money for the future — especially if you’re between the ages of 50 and 60 and still need to plan for a retirement that could last 20 to 30 years.

Rely on Other Assets for Income

The more time you can give your portfolio to recover, the better. The last thing you want to do is to solidify your investment losses by selling assets at deflated prices. 

So, if you have any “safe” assets — such as real estate, interest from bonds, or an emergency savings buffer — they can help bridge the gap and keep you afloat while you wait for your portfolio to recover. And if you don’t have any assets to fall back on, building them up before you retire can be a great way to help you prepare for future dips that could occur.

Rethink Social Security

Another way you can get your retirement savings back on solid ground is by rethinking Social Security. You’ll receive the biggest potential payout if you wait until age 70 to claim benefits instead of taking them at 62 or full retirement age. If you have a big enough cash buffer or are in a position to work a few more years within your retirement time horizon, delaying Social Security could be one way to maximize your future monthly income.

Of course, delaying benefits won’t be a good option for everyone. If you’re in dire need of money now, or you would have to sell important assets to get by, it may make sense to start collecting benefits earlier. It entirely depends on your situation, which is where talking to a financial advisor can come in handy. 

Get Help Now

A market downturn right before retirement age can wipe out decades of saving and hard work. When you’re young, this may not be a big deal because you still have plenty of time to rebuild your wealth. But for 50 to 60-year-olds who are a few years from retirement, the impact could be disastrous. 

You’ve spent decades planning for retirement. And no matter how prepared you are, watching your investments take a hit right before you reach retirement age can pile on the stress and uncertainty. 

If you’d like help navigating what to do if your portfolio takes a hit right before retirement age, reach out to Watts Gwilliam and Company. Their team of professional financial advisors can help you gain a greater sense of confidence as you navigate these uncharted waters and prepare for life’s next chapter. 

Retirement Timeline – Important Steps that are Often Overlooked

If you’re not currently working with a financial advisor or are ready to make a change, schedule a no-obligation conversation with the Watts Gwilliam team. We’re here to help!

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David Watts

Dave is one of the firm’s founders. He helps business owners, professional athletes, and other high-net worth clients develop and implement financial plans and strategies. He also specializes in helping those with single-stock positions to diversify and manage their financial lives. Other areas of specialty are wealth transfer plans for concentrated stockholders and business owners; tax minimization strategies for those with employee stock options; cash flow management; and risk management planning.