Many people would probably rather retire when the market is hot and their portfolio is performing well. But of course, we can’t always plan for everything. Sometimes we need to retire for health or personal reasons. At other times we feel ready to retire and simply don’t want to wait on the market to rebound, not knowing exactly when that will be. So if you find yourself in that situation, what can you do to plan for a stable retirement in a down market?

A common strategy is to divide your portfolio into three “baskets”, based on when you need the money. For example…

Basket one provides for short term income. If you need to retire during a down market, you would designate this basket to hold one to three years of income. This includes stable liquid assets such as cash and cash alternatives. The point of drawing income from this basket is to avoid selling other assets when returns would be low.

Basket two provides for mid-range income. This basket should be designed to provide for 5 or more years of income. Place fixed-income securities like intermediate and longer-term bonds, into this basket. You might also include low-risk, income-producing equities. Any income produced within this basket can flow into the first basket, to keep it replenished. If necessary, securities in this basket can be sold during a down market.

Basket three provides for long-range future income. Think of this basket as a long-term growth engine that fuels the first two baskets. It should hold your assets that are more volatile yet show more long-term growth potential. Over time, investment gains within this basket can be funneled into the first two baskets.

The basket strategy isn’t right for every situation, but is one option to consider when retiring in a down market. Most importantly, you should consider shifting assets before you retire if you choose to go this route. If you’re concerned about the state of the market and your retirement timing, call us to schedule an appointment. We can review your options with you, and help you visualize a retirement strategy that helps you feel confident about your future.