The calls begin to sound the same. Before lunch, a man who worked for a regional utility for thirty-one years, with his retirement party already scheduled, watches the S&P fall an additional four percent. With a tight voice, he calls his advisor to ask if he should convert everything to cash before closing. Listening to these discussions gives the impression that the worst harm isn’t occurring in the portfolio at all. It’s taking place somewhere behind the eyes.
One type of cruelty is a market crash that occurs three months before retirement. You followed instructions for decades. steadily contributed, disregarded the commotion, and adjusted your position when your advisor prodded you. The floor then gives way, revealing the finish line. It’s difficult to ignore how frequently this appears to occur closer to the conclusion rather than the start. Perhaps that is simply confirmation bias. Perhaps there is a sense of humor in markets.
| Reader Profile / Key Information | Details |
|---|---|
| Reader Persona | Pre-retiree, 62–67 years old, within 90 days of leaving the workforce |
| Average U.S. retirement savings shortfall | Roughly 40% of near-retirees feel behind on their goals |
| Typical portfolio mix at this stage | 50–60% equities, 30–40% bonds, remainder in cash |
| Most exposed account types | 401(k), IRA, taxable brokerage |
| Average bear market duration | Around 9–10 months historically |
| Recommended cash reserve | 10–24 months of essential expenses |
| Sequence-of-returns risk window | First 5 years of retirement |
| Primary defensive levers | Spending cuts, delayed Social Security, part-time work |
| Behavioral pitfall | Panic-selling near the market bottom |
| Useful research source | Vanguard retirement research |
| Crisis emotional state | Fear, regret, second-guessing |
| Best first move | Pause. Do nothing for two weeks. |
The portfolio’s actual fate is not mysterious from a mechanical standpoint. You’re likely to see a paper loss in the high teens if you have a roughly 60/40 mix and stocks fall 30%. Some of it is mitigated by the bond side, but not always; 2022 served as a reminder to everyone that when rates move sharply, bonds can decline along with stocks. Those who discreetly transferred a year’s worth of expenses into a money market fund six months ago are currently sleeping the best because cash is stable. They appear prophetic. For the most part, they were just anxious at first.
The loss itself is not the true risk in this window. Sequence-of-returns risk is what planners refer to it as, and it merits greater consideration than it currently receives. There is a significant difference between withdrawing 4% from a flat portfolio and withdrawing 4% from one that has recently experienced a 25% decline.
By selling shares at a discount, you are locking in the loss and reducing the base that should increase. Based solely on the performance of the market during their first five years of retirement, two retirees with identical savings and withdrawal rates may have outcomes that differ by decades. It’s the math, and it’s an unfair piece of math.
As red numbers march across the screen, there’s a temptation to act dramatic. Transfer everything to cash. The retirement date should be cancelled. Make a call to the children. The majority of advisors will gently advise you to do nothing for two weeks. In the first week of a crash, the urge to take action is rarely your friend. It seemed like an eternity at the time, but in retrospect, investors who held through 2008 recovered everything in about five years.
In reality, the near-retirees who are calmer perform smaller and less fulfilling tasks. The European cruise is reduced to a domestic excursion. The new car is postponed. They consider working part-time, sometimes at the same company, and other times at something they’ve secretly wanted to try. Some people postpone Social Security by a year, which increases the final payout and lowers the amount they must withdraw from the portfolio. It’s not glamorous at all. It all functions.
The course of the coming months is still uncertain, as it always is. However, after watching a few of these cycles, people often say the same thing, nearly verbatim. The market reappeared. What they believed they were losing was not lost. Sitting still was the most difficult part.