How older workers and retirees can stop worrying about falling inventory


If you are an older worker or a retiree, you can naturally worry about the recent falls in the stock market – especially with concerns that you will not have time to make up for your losses.

Here are two tips to help allay your fears:

  1. Keep a historical perspective on stock returns
  2. Adopt strategies to protect against stock market crashes

The historical point of view

A look at annual returns (including dividends) for the S&P 500 since 1928 shows that 2018 was the first annual loss after a nine-year winning streak, which tied the record for winning streak. If you’ve been invested in stocks during this time, you are still one step ahead – even taking into account the losses of 2018 – than if you had been invested in bonds or other “safe” investments.


The chart also illustrates a significant ‘double-double’ for the S&P 500:

  1. It has had well over twice as many years of upside as it has had years of decline – 68 up versus 25 down.
  2. The average gain during the rising years was almost double the average loss during the falling years. So when the market went up, investors usually made more money than they lost when the market went down.

If you’re 50, 60, or even 70, you can expect to live one, two, or even three decades longer. This should give you plenty of time to weather most market declines.

Strategies to protect against stock market crashes

History shows that you will most likely experience a few more stock market crashes in your retirement years. The problem is that no one – not even the “experts” – can reliably predict when they will arrive. We also know that pulling out of stocks during a crash is one of the worst moves you can make. This locks in your losses and misses out on good returns when stock prices recover.

This is why you will want build your retirement income portfolio in a way that gives you the confidence that you can overcome future accidents, whenever they might happen.

To do this, you will need sources of retirement income that can cover your basic living costs and not go down when the market collapses. These sources include Social Security, a pension if you’re lucky enough to have one, and annuities that you can buy from an insurance company.

Start by optimizing your income from Social Security, which is the “almost perfectRetirement Income Generator. For many middle-income workers, enhanced Social Security benefits might be the only guaranteed lifetime retirement income they need to cover basic expenses.

If you have accumulated a large benefit under a traditional pension plan, make wise choices to maximize this valuable benefit. And be sure to resist the urge to take a lump sum instead of the guaranteed monthly pension, if this choice is offered to you. A lump sum is generally not the best choice.

Retirees who want a more guaranteed retirement income to cover their basic living expenses may consider “bond ladders”, low-cost payout annuities or monthly payments reverse mortgages.

Once you have accumulated enough sources of guaranteed income to cover your basic living expenses, you should feel confident to invest your remaining savings significantly in stocks to give you the potential for growth. These savings can be invested in low-cost maturity funds, balanced funds or equity index funds. Use that money to generate a retirement salary that covers your discretionary living expenses, such as hobbies, travel, and gifts, or to spoil your grandchildren.

Adopting these two tips should inspire you to stay invested when the market goes down and wait for it to rebound. If your basic living expenses are covered, you should have the patience to overcome accidents.


Leave a Reply

Your email address will not be published.