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Imagine you’ve spent decades investing to build up a sizeable pension pot and then, just as you’re finally able to tuck into that money, you see the value of your pot diminish as markets slide.

It’s a risk that retirees and the soon-to-be-retired cannot easily ignore. And it’s a real worry for many people right now, given the shaky economic backdrop and ongoing (and potential future) erosion of their pension pot’s spending power as inflation rips higher.

But then the value of your investments can fall as well as rise. And sometimes it can fall significantly due to an external crisis or weak economic conditions. So if you don’t have a ‘final salary’ pension paying a guaranteed income – which, increasingly, means a lot of us these days – you are always exposed to these market risks.

The good news is that ‘bear markets’, when stock markets fall by 20% or more from their previous peak, tend to be less frequent, less long-lasting and less pronounced than their opposite, ‘bull markets’1, when they are rising.

But regardless, as investors we should always be prepared for stormy weather as well as calmer waters, given none of us can see into the future.

That means having a long-term and strategic mindset throughout our investment lives – even when we’re close to, or already in, retirement. You might not be as young as you once were but people generally are living longer and, in many cases, are able to retire earlier.

It also means continuing to adhere to our four investment principles and staying the course when markets are weak, so you avoid the expensive errors that can befall those who don’t, as my colleague James Norton recently explained.

Here are 10 additional tips to help you weather the storm if you are concerned about potentially retiring into a bear market or being retired during one.

1. Be ready for anything and plan early

Look to be flexible from the beginning of your retirement and make sure you can pivot your financial plans if circumstances change. You have a base-case scenario but what about your best- and worst-case scenarios? What if you have a sudden illness or need to care for someone? What if you inherit or win some money? What if an unexpected opportunity presents itself to earn extra cash on the side? How much emergency cash might you need? Thinking about such things can get you in the right frame of mind to adapt if and when your investments fare better or worse than expected. This can be especially important in the first decade of retirement as the decisions you make then, and the market conditions that prevail during this period, can have an outsized impact on the long-term viability of your portfolio.

2. Review your retirement goals

Some studies suggest2 that to continue enjoying the kind of lifestyle you enjoyed before you retired requires 50% to 80% of your pre-retirement income. But if this ‘replacement ratio’ includes a large discretionary element, then you probably have more room to adjust. So how about a more fundamental reassessment of your retirement income needs? Ask yourself: What’s most important to my happiness? Make a personal budget and prioritise and work out your own ideal replacement ratio.
For more on replacement ratios, read ‘Four steps to a successful retirement: How much will I need?’

3. Adopt a flexible spending strategy

Rather than take a fixed percentage amount from your pension pot each year and then adjusting it for inflation, why not adjust your income depending on how markets fare? Take more out when markets do well and less when they don’t – but do it within a predetermined range by setting a floor and a ceiling. In this way, you never withdraw too much or too little. We call it ‘dynamic spending’ and our research shows3 it can help your savings last longer in retirement. So if you’re faced with a bear market one year, apply a slightly lower withdrawal rate and then upscale as markets recover in subsequent years.
For more on dynamic spending, read ‘How to spend your pension’

4. Think about cash management

Rather than risk a continual drain on your investments by withdrawing a monthly income as markets reduce, you could consider placing a whole year’s money into a relatively safer instrument like a money market fund or high interest savings account and then draw income from that. Doing this will ensure you don’t have to focus on your bond and share holdings during what might be a testing period or risk having to capitalise losses. As a bonus, a money market fund can also offer positive returns in a higher interest rate and volatile environment versus shares, albeit a low positive return.

5. Get your costs on a more sustainable footing

From cutting back on discretionary items like TV subscriptions or more fundamental services like your heating – whether that’s turning down the thermostat or investing in solar panels for future savings – are there any unnecessary overheads in your life? What about transport costs? Have you taken maximum advantage of the concessionary fares or even free public transport that may be available to you from as early on as aged 604? What about debt? If you still have any, pay what you can down. And then there are your investment costs, which – once you’re fully retired and dependent on your pension – are a direct drain on your main source of income, much like a tax. How much more of your investment return could you be keeping for yourself by moving your ‘defined contribution’ pension (or pensions) to a lower-cost provider?
For more on this, read ‘How bringing your pensions together could help your quest for a happy retirement’.

6. Downsize your home

At the last count, some 65% of households were homeowners5. For older groups the figure is significantly higher, which means many retirees and soon-to-be retirees have potentially life-changing wealth stored in their homes6. Against a weak investment backdrop, having the option of being able to move to a cheaper place can provide additional financial security. It can help in two ways: by converting some of the equity in your home into ready cash you can re-invest and spend as you see fit and by reducing your running costs so you are able to get by on a smaller income.

7. Talk to a financial planner/adviser

If ever unnerved by the economic and market backdrop or unsure about the best way forward, you could consider talking to a financial adviser. They could take a holistic view of your circumstances and help you retune your plans, so you’re best able to make the most of your retirement wealth and can attain your retirement goals.

8. Lean on other sources of income

Do you have other investments or assets you can tap for income, from rental income to cash savings? Are there things in your house that you’ve accumulated over the years that you could sell to raise some money? With online marketplaces, it’s a lot easier than it used to be. Do you still need two cars, let alone one? How about taking in a lodger? There are many potential possibilities that could buy you time because the longer you leave your pension investments untouched, the more time they have to recover in the event of a weak market. 

9. Delay your retirement

A few extra years of employment can greatly enhance your retirement security – just how much becomes obvious if you play around with an online pension income calculator, such as this one on the Vanguard website7. So if you haven’t retired yet and were thinking of doing so soon but can put it off a while longer, just until the economic climate improves, then it’s certainly worth considering a delay.  

10. Return to work

Similarly, if you’ve already taken early retirement, it’s maybe worth asking whether a return to some form of paid work for a few years may now be in order – whether full-time, part-time or on a freelance basis – just to ensure your pension savings stretch further. To paraphrase recent work by our US researchers, the ‘great retirement’ of the pandemic as many older workers left the workforce earlier than expected, could turn into the ‘great sabbatical’ as the combination of higher inflation and weaker markets forces many of them to return to make up shortfalls in their retirement funding8. If so, the good news is that a record-high 1.3 million vacancies were reported in the UK in May 2022.



1  From 1980 to the end of 2021, using the MSCI World Index and the MSCI AC World Index as a proxy for global shares, Vanguard calculates that there were nine bear markets in US dollar terms lasting an average of 236 days each. The average total return (with dividends reinvested) was minus 26%. In contrast, the bull markets over this period lasted an average 852 days and delivered an average total return of 99%.

2 Lobel, Hank, CFA, CFP®, Colleen Jaconetti, CPA, CFP®, Ankul Daga, CFA, Garrett Harbron, CFA, CFP®, ‘The UK replacement ratio: Making it personal’, December 2020.

3 “Natural yield” is the return of the portfolio in the form of dividends and interest.Daga, Ankul, CFA, David Pakula, CFA and Jacob Bupp, ‘Sustainable spending rates in turbulent markets’, Vanguard Research Note, January 2021.

4  If you live in London, for example, you can get a free bus and tube pass at age 60. For more information of this and what is available elsewhere in the country, see ‘Apply for an older person's bus pass’.

5 England only.

6 Residential property, once mortgage debt is eliminated from the equation, accounts for 36% of Great Britain’s net wealth. Household total wealth in Great Britain: April 2018 to March 2020, Office for National Statistics, 7 January 2022.

7 The government’s Money Helper website also has a pension income calculator.

8 Clarke, Andrew S. CFA, Fu Tan PhD., Adam J. Schickling, ‘The Great Retirement? Or the Great Sabbatical’, June 2022.


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