Market declines are not rare events. Since 1984, investors have experienced multiple bear markets and corrections, roughly one significant decline every few years. The real risk is not that markets fall, but whether a retirement plan has been designed with those declines in mind. A well-structured plan anticipates market downturns, provides income sources that are not exposed to falling markets, and allows long-term investments time to recover.
Market declines are not occasional events. They occur regularly. In the last 40 years, investors have experienced six bear markets and ten market corrections. A bear market represents a decline of 20 percent or more from a previous high, while a correction is typically a decline between 10 and 20 percent.
That means there have been 16 meaningful market declines since 1984. On average, that is one every two or three years.
The unusual thing is not that markets decline. The unusual thing is that investors are still surprised when they do.
Most people believe they’re long-term investors until the market begins to fall.
That’s when the emotional pressure kicks in. Panic, anxiety, and uncertainty often follow. People start saying things like, “This time is different,” or “I’m not buying into a declining market. I’ll just wait and see what happens.”
Those reactions feel reasonable in the moment, but when fear replaces discipline, good judgment goes out the window.
Most investors don’t fail because markets decline. They fail because they were not prepared when the declines occur.
Luckily, preparation changes that experience entirely.
Over the course of my career as a financial planner in BC and Alberta, I’ve witnessed numerous market disruptions.
This includes:
In addition to those bear markets, there have also been numerous corrections triggered by events such as the Asian financial crisis, the Russian debt default, the flash crash, Brexit, and banking concerns.
The point is, market declines are a normal part of investing. They are not an exception.
Why Is Having a Retirement Plan So Important During Market Declines?
Before deciding how to react to a declining market, it’s important to know whether you actually have a plan.
Not simply a collection of investments like various RRSPs, mutual funds, and pensions, but a proper retirement plan.
A real retirement plan takes into consideration your lifestyle, goals, and family.
It considers how long you plan to work, what you want retirement to look like, and what major financial decisions may appear along the way.
From there, the plan begins to take shape.
Taxes are examined (not just this year but many years into the future). Estate considerations are reviewed so assets pass properly to a spouse or the next generation. Risk is evaluated so the plan reflects both your comfort level and what the plan itself can tolerate.
Each piece must be examined carefully and then connected so the entire plan actually works together. And the plan must be created to withstand market fluctuations, so your retirement income isn’t at the mercy of the markets.
One of the most important questions a retirement plan must answer is this:
Where will income come from when markets decline?
Withdrawing money directly from investments that are falling in value can lock in losses at exactly the wrong time.
A thoughtful plan may instead draw income from assets that are not exposed to market volatility during that period. This allows the equity portion of the portfolio time to recover and potentially take advantage of opportunities that often appear during difficult markets.
In other words, the plan is not to reacting to the decline. It was designed with the decline in mind.
Many portfolios underperform expectations not because the market fails, but because discipline breaks down.
Investors may chase recent performance, sell investments that are temporarily declining, or attempt to time the market.
Trying to time the market is one of the fastest ways to damage long-term results.
Sometimes the issue is behavior. Sometimes the investment itself was never appropriate for the plan. And sometimes the investment simply hasn’t performed as expected.
The only way to know is through a deliberate and thorough review.
Protecting a retirement plan during market volatility often comes down to three aligned elements:
When those three elements are aligned, decisions become clearer, and confidence improves even when the market feels unstable or uncertain.
The real question is not whether markets will decline again.
They will.
The real question is whether your plan was built with that reality in mind.
If you’re not sure and you’d like to be confident that your financial plan can weather the ups and downs of the market, let’s review your plan. There are two ways to work with me. If you’re approaching or living in retirement in British Columbia or Alberta, please join me at my next retirement seminar.
Or book a confidential introductory conversation with me.
Wes Forster is an experienced financial planner in Kelowna, BC, serving clients across British Columbia and Alberta. He helps individuals approaching or living in retirement build integrated, stress-tested financial plans. Through his work at Seravue Financial, Wes helps clients make thoughtful retirement income decisions with clarity and confidence.
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