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For decades, investors have been told that “buy and hold” is the surest path to success. We’re encouraged to invest in quality companies, stay the course, and over time, the market will deliver positive results.
That may have worked fine for someone in their 40s or 50s with decades of earnings ahead.
But if you’re retired — or near retirement — “buy and hold” often turns into something else entirely: Buy and hope.
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- Hope that the market doesn’t crash again
- Hope that interest rates or inflation don’t derail your income plan
- Hope that you won’t outlive your money
Unfortunately, hope is not a reliable financial strategy.
The problem with ‘buy and hope’
When you’re no longer earning a paycheck, your investment losses become real, not just “paper losses.” A 20% market decline isn’t something you can simply wait out when you’re drawing income from your portfolio.
Every dollar withdrawn after a loss compounds the problem, and you’re taking money out of an already shrinking pool.
The risk retirees face
We’ve seen one of the longest bull markets in history, fueled by low interest rates, stimulus and optimism. But economic cycles always turn. The next downturn isn’t a matter of if — it’s a matter of when.
For retirees with significant assets, the next downturn could be devastating if their portfolio lacks appropriate risk management strategies. Remember, a 30% loss requires a 43% gain just to break even!
Hope is not a strategy for a retiree.
The rules change once you transition from accumulating wealth to taking income from it. Market volatility that once seemed tolerable can now have lasting consequences.
This is primarily due to the danger that market losses early in retirement, combined with regular withdrawals, can permanently erode a portfolio’s ability to recover.
Even if the market eventually rebounds, the damage may already be done. Retirees who are drawing income during a downturn may be forced to sell assets at depressed prices, locking in losses and reducing future growth potential.
Why timing matters more than ever
After 16 years of unprecedented market performance and economic stimulus, many portfolios have benefited from tremendous growth since 2009.
However, history shows that markets move in cycles and extended bull markets are inevitably followed by corrections.
The lesson is clear: The time to prepare is before the next downturn, not after it begins.
A shift toward preservation
For retirees with substantial assets, the goal should shift from maximum growth to strategic preservation. A prudent wealth management plan should focus on:
- Reducing downside risk during volatile markets
- Creating sustainable, tax-efficient income streams
- Diversifying across assets to minimize exposure to any single sector or market event
- Preserving purchasing power against inflation
- Helping minimize taxes and preserving more of what you’ve earned
- Implementing estate and legacy planning to protect the next generation
Preserving wealth requires active management, thoughtful allocation and a clear understanding of how each component of your portfolio supports your long-term goals.
Moving beyond hope
The financial landscape has evolved, and some retirees may find that traditional investment approaches no longer align with their income needs or risk tolerance. “Buy and hold” may sound reassuring, but for those who cannot easily replace lost capital, it is often a passive and risky approach.
Instead, consider adopting a strategy built on preparation, preservation and purposeful planning — one that seeks to help safeguard your retirement assets in various market conditions.
Because in retirement, financial confidence isn’t about how much you can make. It’s about how much you can keep.
If you’ve already accumulated your wealth, your focus should shift from growth at all costs to preservation and stability. The old “buy and hold” mantra may still be fine for young investors, but for retirees, it’s time to move beyond hope and start planning with purpose.
The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.