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How to Retire During a Market Downturn: It’s All About Withdrawing This Way


It’s always hard to make your retirement savings last as long as you need it to — but it becomes even harder when you’re retiring during a market downturn, as Americans retiring right now are experiencing. A market downturn means that any money you still have in the market is shrinking rather than growing, potentially losing you money at the exact point you’re ready to use it. T. Rowe Price, though, has a strategy for maximizing your savings if you are unlucky enough to retire during a market downturn.

Whether you’re ready to retire now or planning for the future, consider working with a financial advisor to make sure you do it right.

How To Withdraw During a Downturn

The key to successfully withdrawing your retirement funds during a market downturn is to take a conservative approach and not take too much out at the beginning. According to a recent T. Rowe Price study:

“By following a conservative withdrawal approach early in retirement and planning for temporary adjustments along the way (if needed), retirees can weather the markets and have a truly fulfilling and enjoyable next phase of life.”

The key is to remember that a market downturn won’t last forever. Bear markets typically last much less long than bull markets, so even if the first few years of your retirement are tough, chances are that most of your retirement won’t be.

Historical Precedent for Conservative Strategy

retire market downturn

To test this theory, T. Rowe Prices experts looked at three historical examples:

1. The 1973 recession, caused by an oil embargo and an energy crisis.

T. Rowe’s analysis tested the “4% rule,” which favors taking out an initial withdrawal of 4% from your retirement funds. Though the first few years of retirement for someone retiring in 1973 were difficult, seeing shrinking portfolios and significant inflation, things got better quickly. After 30 years, the portfolio balance was double where it started, assuming a 4% draw down and a portfolio that was 60% stocks and 40% bonds.

2. The 2000 recession, coinciding with the downturn after the Sept. 11 attacks

Again, the first few years were difficult, but by the end of 2022 someone retiring in 2000 would have a portfolio worth near what it was at the beginning of retirement — again, assuming a 4% drawdown and a portfolio that is split 60/40 between stocks and bonds.

3. The 2008 recession, caused by the financial crisis

There was some pain in the beginning for this retiree, but by 2021 they had a portfolio that had increased in value by more than 50%, using the same assumptions as the above examples.

The Bottom Line

retire market downturn

The market isn’t looking good right now, and that is scary for everyone — especially those who are already retired or nearing retirement. There is good news, though — market downturns and recessions don’t last forever. If you are patient and are conservative in your drawdown strategy, chances are that your portfolio will rebound and you’ll be able to enjoy the retirement you planned on — provided you saved what you needed to during your working life.

Retirement Planning Tips

  • A financial advisor can help you make the right decisions at all stages of retirement planning. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • You can use SmartAsset’s free retirement calculator to figure out how much money you’ll need in retirement and if you’re on the right path.

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