Rubino & Liang Wealth Partners

What Happens If You Retire Right Before A(nother) Market Crash?



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What COULD a market crash mean for your retirement accounts?

It really depends on how your retirement plan is structured – the balance of your liquidity, fixed, and growth assets in retirement.

If you don’t have a well balanced portfolio / retirement PLAN, you could be exposed to a few different things:

  • Sequence of Returns Risk,
  • Liquidity hardships,
  • Inflation exposure

Let’s go in to each one of these with more detail:

Sequence of Returns Risk
  • Withdrawing from retirement accounts that are taking a loss in the market means that the money that is left in your retirement accounts has to “work harder” every year to keep enough in them to sustain your retirement expenses.
    • What does “work harder” mean?
    • Shouldn’t my financial advisor/employer be moving my assets in to a more conservative mix?
      • (if your employer/advisor isn’t consider YOUR unique situation, they might not know your actual needs in retirement, or have planned/stress-tested for a scenario like a market adjustment)
Illiquidity Hardships
  • On another extreme, if you have too much of your portfolio in assets that aren’t subject to market volatility, but limit access to your funds (like a CDs, real estate, etc.), you may not be able to make your monthly essential expenses.
Inflation Exposure
  • Do options that give you liquidity give you the same returns today that will keep up with inflation? (Bonds, CDs, etc.)

How do we help prevent ourselves from ending up in one of these scenarios?

The importance of having balance in your retirement plan:

The 3 Bucket Approach to Retirement Planning:
  • A liquidity bucket (Savings/cash now)
  • A fixed asset bucket (mailbox money)
  • A growth bucket (money in stocks for growth to help with inflation, health care costs, etc.)

Structuring (and frequent monitoring/rebalancing) these buckets is key to help protect you from market volatility in retirement.

This is why working with a financial advisor is a good idea, you’ll have someone overlooking your retirement plan, making sure that it works every day of the year, so you won’t have to…


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