A Letter to Our Retirees During This Crisis

Published 03/27/2020

Over the past five decades, which spans most of our investing lifetimes, we have seen dramatic market declines at least once every decade. In the 1970s, it was an oil crisis. In the 1980s, there was extraordinary inflation. In the 1990s, we had the tech bubble. In the 2000s, we had both 9/11 and the financial crisis of 2008. The 2010s were bookended by the European debt crisis in 2011 and market volatility in 2018. To begin the 2020s, the global markets have been shaken by the coronavirus.

In the midst of any crisis, the most challenging time for investors is when they are looking at steep declines in their portfolio and wondering whether prices will continue to fall. During these times, we expect our clients will be concerned, especially retirees who rely on their portfolios for living expenses in retirement.

We cannot know when the next downturn will occur, and when it does, whether it will be a 10% dip, a 20% correction or the larger drops like this year’s 30%+ stock market fall. Data suggests nobody else can either. What we can do is cushion the decline your portfolio experiences by holding a portion of your portfolio in bonds.

We set your stock/bond allocation such that you can live through these declines because we have seen what follows when clients “go to cash” during a market downturn — they inevitably wind up worse off over the long run. Even if they manage to get out before the worst of the decline, they inevitably wait until “things are better” at which point they have missed out on much of the recovery. We know this to be true as it has happened time and time again.

There are two points that are very important for retirees:

1.     Recognize that we are planning for decades of withdrawals in your financial plan. The ups and downs of the market would be very problematic if you had to withdraw everything at this point in time, but most retirees withdraw a little bit each year for many years. When we calculate your sustainable spending rates, we factor in that you will likely live through multiple major downturns while you are taking your withdrawals. We use academic and empirical evidence going back to the 1970s to design our portfolios, so they are appropriately diversified to withstand these kinds of downturns.

2.     During the worst of these downturns, you may think midway through the crisis that you have taken on more stock market risk than you have the stomach to endure. If you are feeling so anxious that you are tempted to veer from your long-term plan, then you should reach out to your advisor.

There are several steps you can take if you find yourself at that precipitous emotional crossroads. Here is the course of action that you should take:

1.     Let your advisor know that you are not comfortable. Tell your advisor these market drops are more than you want to bear in the next market downturn. There may be some alternatives that you have not thought of that your advisor can walk you through.

2.     Retake our risk tolerance questionnaire. If you do this now with your advisor, you can better understand how you feel from a risk perspective during difficult times, so you are not tempted to take on more risk during good times.

3.     Hold tight. Stay invested in the markets for now. You have experienced that first steep drop on the roller coaster, and there will likely be a few more with smaller bumps (up and down) ahead. But stick with your allocation and make any changes once your portfolio has recovered.

4.     Talk with your advisor about what you should change about your investments for the long term. Rather than taking action in the short term, have a discussion with your advisor about permanently shifting your stock allocation down by 10%, 20% or even 30% less stocks. But importantly, hold off on doing so until after markets and your portfolio have recovered.

5.     Understand what this allocation change would mean for your retirement. A lower stock allocation usually means spending less because the expected return from a portfolio over retirement will be lower. If the allocation change would make the sustainable spending untenable, then compromise and find a percentage that meets your spending needs but still limits future risk more than the current allocation.

6.      Speak with your advisor about immediate and no-commission annuity products. Many annuity products on the market are unsuitable, but we have access to some that could be appropriate. If you are considering one of these products, your advisor can evaluate whether such investments are appropriate for you and suggest alternative strategies that do not involve market risk.


Our advisors have worked through downturns with many clients in the past. The future is never certain but putting a plan in place for what you will do can give you confidence to weather this and any market decline.