Three Ways You Can Protect Yourself Against Market Downturns

Three Ways Women Can Protect Themselves Against Market Downturns in Retirement

At times, the road of managing your money can be a rocky one. Watching your investments plummet during market crashes is alarming, to say the least. Right now, due to the unrest that the spread of Covid-19 has created in the markets, you may well have seen more than 20% wiped from the value of your portfolio. It might seem horribly unpredictable but the good news is there are ways you can protect yourself against market downturns.

In times of crisis, markets will fall dramatically and suddenly, but if you invest for the long-term, history has shown us that markets recover and continue to rise over time. And sometimes you don’t have to wait that long – even during these last turbulent weeks, the S&P has seen some of its strongest ever days.

Most women we work with want the peace of mind in knowing they won’t outlive their money even when there are market downturns. There are three things you can do to increase your financial resilience, and if you do these, you’ll reduce worry and anxiety significantly in financially uncertain times just prior and during retirement.

#1. Always Have a Cash Fund Available

Good financial planning involves having a cash fund available at all times, generally enough to cover three to six months of your normal expenses. I’d add to that recommendation that by the time you reach retirement, you should have enough cash to fund living expenses (not covered by social security or other guaranteed income) for one to two years.

If you liquidate your investments when there has been a significant downturn during the first years of your retirement, you will increase your chances of running out of money because it makes it harder for your investment funds to recover when the market is on the rise again. Using your cash fund during market downturns will give your portfolio time to recover.

You may also use the market downturn to your advantage by purchasing additional stocks when they are being sold at bargain prices. This is only going to make your investments stronger when the market picks up.

Make sure your cash fund is working for you, too. Choose a high-interest, no-fee account that keeps your cash easily accessible – there are countless options out there, and you can always ask us for more advice.

#2. Use a Financial Planner to Increase your Retirement Success

One of the best methods to develop strategies to address the impact of market downturns early in retirement is to partner with an expert. While we never really know when a down market is going to happen and exactly what it will look like when it does, there are tools financial advisors use to stress-test your retirement.

We would all like to think that bad things won’t happen, but the truth is that certain events can take place that can totally derail a retirement plan. This means that your plan should include taking a serious look at what vulnerabilities you have (down markets, long-term care events, premature death of husband, inflation, taxes, etc.) and developing strategies to address those risks, BEFORE they happen.

Working with a financial planner to develop a comprehensive retirement plan that can withstand the vulnerabilities that you have will give you peace of mind. Using computer-aided simulations, it is important to periodically review and reassess your plan to test how your investments will cope in different circumstances, making adjustments as needed.

Don’t go it alone – stress-testing is going to help you understand what can go wrong and know you will still be okay if and when it ever does.

#3. Make the Most of Guaranteed Income

Another foolproof method to minimize some of the risk of market downturns is to make the most of the guaranteed income offered through resources such as Social Security, a company pension, and/or income annuities.

However, you should remember that it’s very important to be invested in the market to hedge against inflation risk (otherwise you’ll face the loss of purchasing power over time). It is also important not to put all your eggs in one basket.

Social Security

Social Security is a key source of income for most Americans of retirement age. Making sure you can make the most of it in later years might need some advance planning, for example by working longer and maximizing your earning potential.

Your benefits will be based on your highest-earning 35 years of employment so, by earning as much as possible for as long as possible, you’ll ensure you maximize those payments.

Social Security is one of the most important decisions you will make regarding your retirement success so be sure to work with a financial planner who is an expert in Social Security maximization. Too often we see women that are more financially vulnerable because they didn’t make the most of their benefit options.


Like Social Security, company and/or government pensions can provide a reliable, stable source of income during retirement. Unfortunately, with the advent of 401k plans, most companies no longer offer pensions; most pension benefits are now associated with public sector entities, like state and federal government.

The amount of the pension is going to depend on your salary and the number of years you’ve been working. As such, your pension should be part of a long-term strategy for your financial well-being in retirement.

Making the most of your Social Security benefits and your pension can help reduce the risk associated with market downturns, and protect your savings and investments as well. After all, money that you can leave untouched is going to be money that helps your overall balance recover when things start to improve.


Another way to guarantee an income and help minimize withdrawals from your investments during market downturns is to purchase an income annuity. Purchasing an annuity guarantees a certain monthly or annual income throughout your retirement.

Although this is not a strategy for everyone, the peace of mind that comes from knowing that your basic costs are going to be covered no matter proves invaluable for some retirees.

Protect Yourself Against Market Downturns

While it might feel like a bumpy ride, always invest with a long-term attitude and sit tight through the roughest parts. Having a cash reserve fund, working with an expert and making the most of guaranteed income are three smart decisions you can make now to ensure a long and financially successful retirement.

If you feel uncertain and would like the reassurance of a professional to advise and support you, arrange a consultation today to see how we may be of help.


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