Brad Perry remembers Oct. 19, 1987 like it was yesterday.
The new retiree from Oceanside, N.Y., was a young podiatrist, starting his career and beginning to save money in a few mutual funds.
But the sea of red on Black Monday was too much. The Dow Jones Industrial Average fell 22.6% in a single day, wiping out almost $2 trillion of wealth.
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“I panicked and sold everything,” remembers Perry, 66. “I just couldn’t deal with it. It was too much pressure.”
That kind of bear market dread might feel familiar to anyone watching the news in 2025.
After a couple of years of double-digit market gains, this year so far this year so far has been a wild display. The S&P 500 and other major stock indexes have flirted close to bear-market territory, defined as down 20% from peaks, before recovering some of those losses.
Meanwhile, though expectations for a recession have diminished, there’s still widespread concern about a general weakening of the U.S. economy. Government layoffs, on-and-off tariff announcements and rampant uncertainty have investment bank J.P. Morgan saying, “We no longer see a U.S. recession, but expect material headwinds to keep growth weak through the rest of this year.” A recession is defined as two consecutive quarters of negative growth; the preliminary count was -0.3% in the first quarter of this year.
For retirees especially, a bear market or recession — or both together — can be dire news for portfolios that have been carefully assembled over a lifetime.
Without new income, it takes a deft hand to evaluate what you have, maximize returns even in a tough environment, manage withdrawals and make sure the money doesn’t run out.
And it’s not just savings to consider: It’s related issues like housing, Social Security and more. In a spiraling economy, the stakes have been raised — and any missteps could have grave consequences for your financial future.
“It can be really scary as you are heading into retirement to see the market behaving so badly,” says Judith Ward, thought leadership director at Baltimore-based fund managers T. Rowe Price. “But we need to learn from the lessons of the past to be prepared for whatever comes.”
Like Brad Perry, who definitely learned his lesson from that market collapse almost 40 years ago. These days, after a successful career that included becoming a medical director at pharmaceutical giant Merck, he isn’t doing any panic-selling.
He has enough cash to get through a couple of years of crisis, and has a balanced portfolio allocation sturdy enough to weather market storms. In fact, he is sanguine enough to be heading off to a cruise in Portugal with his wife — despite the current market insanity.
“Never in all my years have I seen a time like this,” he says. “It’s kind of crazy, and it’s going to be a rocky road for a while.”
Strategy 1: Enough cash for a crunch
With any economic crisis, you want to be ready for the worst. That means having enough cash on hand, to get you through an extended down period before the economy and stock market recover.
“Think about a cash contingency, or as I call it, sleep-at-night money,” says Ward. “It’s like an emergency fund as you head into retirement: If everything is down at the same time, at least you have enough cash to use for spending. Maybe a couple of years’ worth of income needs is ideal.”
If you don’t have that cash buffer, then you could be forced to liquidate holdings when the market is at a bottom. Especially for those in retirement’s early years, that can be a fatal blow to your portfolio’s long-term prospects. (It’s called sequence-of-returns risk, the danger of being hit with a bear market at exactly the wrong time.)
Tim Singel of Grand Rapids, Mich., retired in April. He was a global director for a glass manufacturing company, and had the good fortune to retire at the relatively young age of 60 — but perhaps the misfortune of doing it in the teeth of a slumping market. Before retiring, he created a cash cushion.
“I want enough cash to last around two or three years,” says Singel. “If a market recovery cycle is typically around two years, then I need enough cash to carry me through.”
Strategy 2: The right allocation
During bull markets, wonky issues like proper asset allocation might not be top of most investors’ minds. But in down markets, diversification and allocation become very important, because retirees don’t want to see those hard-won gains vanish into thin air.
It’s not just a question of how much you should have in stocks — it’s a question of which stocks. One study by Morningstar portfolio strategist Amy Arnott looked at which stocks tended to fare better during recessionary periods.
The results, on average: Large companies did better than small, growth did better than value, and sectors like health care and consumer staples did better than others like energy and financials.
To determine the best mix of investments prior to a recession, T. Rowe Price studied portfolios for people entering retirement in 2000 and 2008, two difficult and distinct years in the market.
Using a balanced portfolio of 60% stocks to 40% bonds, along with a 4% withdrawal rate, the study’s Monte Carlo simulations found a 95% success rate in both cases, meaning money is still left over, even after a projected 30 years of retirement.
With those past busts in mind, T. Rowe Price researchers suggest an investment range of between 45% and 65% stocks, between 30% and 50% bonds, and up to 10% cash for someone in their 60s (depending on a variety of individual factors like lifestyle and risk tolerance).
The takeaway: Having a significant portion of fixed income in retirement — potentially even supplemented with additional income streams, like annuities — is critical to tamping down risk and providing a portfolio ballast.
“High-quality fixed income is quite reliable, especially in recessionary environments,” says Christine Benz, director of personal finance and retirement planning at Chicago-based fund research firm Morningstar. “When stocks encounter trouble, it can drag on for a while. So I like the idea of maintaining roughly seven to 10 years’ worth of safer assets in a portfolio.”
To be clear, even bonds have been behaving more erratically than usual, with the economic outlook changing so wildly from day to day.
But you are protecting yourself, with a diversified and balanced portfolio — and that 60-40 split is exactly where retiree Rob Tucker has landed. The 66-year-old from Westfield, N.J., had a long career in financial services with firms like Merrill Lynch and BNY Mellon and remembers all the previous busts. His most vivid memory was from 1987: “Sitting in my boss’ office, watching something called a Quotron machine, blinking negative numbers all day long.”
Thankfully, he didn’t sell at any of those bottoms — mainly because he was afraid of making things even worse. What he has learned: “It does help to not be 100% in the market,” he says. “I’m now at a 60-40 allocation myself, so if the market goes down 20%, maybe I’m only down around 12%. And these days, safer assets like bond funds and CDs are earning 4% to 4.5%. That’s not nothing.”
Strategy 3: Spending adjustment
Here’s some bitter medicine: External events, like tariff decisions or stock-market swings, are not within individual control. But here’s something that is in your control: Spending.
In other words, one way to ensure your retirement portfolio lasts longer is to dial down your annual withdrawal needs. “Market downturns in retirement’s early period have a big impact on wealth accumulation and future spending levels,” says Yimeng Yin, a research economist at Boston College’s Center for Retirement Research.
“If we are experiencing a severe downturn, the important thing to do is to think about adjusting your spending. Otherwise you are locking in losses in those early years, and you won’t be able to earn returns on those assets in future.”
So what does that mean, practically? A traditional rule of thumb is that a 4% annual withdrawal rate is sufficient to make sure you won’t outlive your money.
But an even more powerful solution is a so-called “dynamic” withdrawal strategy — not taking out fixed sums every year, but pivoting depending on market performance. As an example, after bear market years, don’t take out anything at all and instead live on existing cash reserves. That will ensure your retirement kitty multiplies rather than depletes, according to research by financial firm MassMutual.
That doesn’t have to mean a life of lack. But it could mean putting off some big-ticket items — like a new car, or a big home renovation or a lavish trip — at least until the economy picks back up.
That’s the attitude of Stephanie Le, 57, a director of giving at Hospice of Michigan. Having left Vietnam as a child just before the fall of Saigon (called Ho Chi Minh City since the war), she built a successful career in the U.S., and is planning for retirement with her husband.
They enjoy the idea of wintering in small towns in Italy, Spain and Portugal. But if the market blows a hole in their portfolio, “we are flexible in our spending,” she says. “We do tend to splurge on traveling, but if the market tumbles for a year, I am not one to say ‘I have to go.’ We will adjust our perception, and have a staycation instead. That’s one way to face a turbulent market.”
Strategy 4: Have a Social Security plan
Yes, a bear market and/or recession will greatly affect financial planning for many retirees. But here is a dose of reality: 55% of retired households have less than $100,000 in investable assets, says the retirement research center’s Yin.
“For them, market risk is not as major a concern,” he says. “In those cases, Social Security is the dominant source of retirement income.”
Which means that your big Social Security decision — when exactly to start claiming it — becomes very important indeed. On the one hand, taking it as soon as you are eligible can be part of what Yin calls a “floor” income strategy, of using stable income sources to cover basic expenses.
On the other hand, if you are financially able, delaying that Social Security start date will boost monthly payouts for the rest of your life. Claiming it before most people’s full retirement age of 67 reduces the lifetime benefit by as much as 30%, or 6% a year, according to investment firm BlackRock, while delaying it will boost it by as much as 24%, or 8% a year.
To break that down into an average monthly Social Security check, a 62-year-old is looking at a maximum of $2,831, while a 70-year-old could receive $5,108 — an eye-popping difference.
That’s exactly why Stephanie Le is planning to put off claiming Social Security as long as possible. “We aren’t planning to touch it until we’re 70, because we don’t need it yet,” she says. “My parents both passed away in their 90s — so I would say my chances of living beyond my mid-80s are pretty high.”
Strategy 5: Manage big-ticket expenses
One old retirement stereotype involves selling the family home, and moving to a sunnier spot like Florida. But as we enter such uncertain times, you need to be flexible about what is the main source of wealth for many American families: The house.
Just remember the collapse after the subprime financial crisis, when median home prices fell by almost 30% from the 2006 peak to 2009. While it’s impossible to predict where the housing market will go, if rates stay high and sales activity plummets, it could limit your options: Real-estate information site Zillow is now forecasting a 1.4% decline in national home values this year.
As a result, if after a long career your house is paid off — or close to it — you might want to stay right where you are. Owning an asset like that free and clear is a game-changer for your retirement spending.
That’s what Rob Tucker is thinking in Westfield, N.J. “Our mortgage will be paid off this year,” he says. “That’s going to be a big saving, and will make living here pretty cheap. So I think we’re better off staying put.”
Whatever you decide, there are ways to leverage that asset. A home equity loan or line of credit, for instance, is one way to tap equity when necessary. If you really don’t need the space anymore and want to slash those property taxes, you can always downsize.
There is also the option of a reverse mortgage, which essentially converts that equity into a monthly check and allows you to age in place. “Consumer protections for reverse mortgages have gotten much better than they were,” says Morningstar’s Benz. “So they are something to consider, as a way of tapping some of that wealth.”
Strategy 6: Sit back and enjoy
Put all that advice together, and you basically want to be like Frank Brown. After the market swung thousands of points in a single day in April, following the announcement of global tariffs, the 67-year-old former healthcare executive did research into all the past recessions he had lived through: 1987, the dot-com crash in 2001 and the financial crisis of 2008.
“Those were some pretty devastating crashes, and even in those worst-case scenarios, the market was back within a couple of years,” says Brown, of Hockley, Texas.
But those previous shocks did spur him to a debt-free lifestyle. He now has a paid-off house and car, steady income sources like Social Security and annuities to cover basic expenses, and a portfolio that generates income no matter what the market is doing.
“I call it ‘turning-the-locks’ money,” he says. “I know what my nut is, and what it costs us to keep everything running — food, taxes, insurance, electricity, our few acres in the country.
“I retired a week ago today, and it’s the first time I haven’t had to go to a job in 49 years. It feels pretty doggone good, let me tell you.”
Note: This item first appeared in Kiplinger Retirement Report, our popular monthly periodical that covers key concerns of affluent older Americans who are retired or preparing for retirement. Subscribe for retirement advice that’s right on the money.
