Bear markets are inevitable, but the havoc they potentially wreak on your retirement may be minimized.


When I go camping in the wilds of the Pacific Northwest, I take measures to protect myself against the risk of a bear attack—like putting food far away from my tent when turning in for the night: The grizzly beasts only bother you if youʼre carrying food; sleeping with snacks under your pillow is just asking for trouble.


Like the furry animals theyʼre named after, bear markets can inflict tremendous damage—anyone braving the volatility of the stock market must also take self-preserving precautions. For those who may not be familiar with the term, a bear market happens when there is a 20% decline from market highs; a bull market, meanwhile, is one that moves upward in the absence of a 20% pullback (in both the S&P 500 and Dow Jones Industrial Average).


The surging bull market of the last few years has been great for those of us who own stocks (meaning half of all Americans). If the old “what goes up must come down” axiom applies to the stock market, however, then it seems like weʼre long overdue a regression to the mean—in other words, the pendulum is bound to swing back to bear market territory.


What this means for near-retirees

The last bull market lasted for five years and ended, in dramatic fashion, in March 2009. The Great Recession had a devastating effect on 403(b) and IRA balances everywhere, and many ill-equipped investors were thrown for a loop and retired with much less money than they had anticipated.


So, with the very real possibility of market lows—even nosedives—in the years ahead, what should an investor in her 50s, with a relatively tight time horizon, be doing to help protect her assets? If youʼre a decade or so away from retirement, consider these scenarios during a bear market:


1. If your asset mix is periodically rebalanced to reflect your stage in life, you should be less concerned about whether the market is bearish or bullish. For example, a 20-something investor is working with a 40-year timeframe and is therefore better positioned to weather a bear market. Light years away from retirement, she may be able to regain losses over the long term. Of course, past performance is no guarantee of future results.


2. If a 50-something is age-appropriately prepared for those bear markets that inevitably lurk around the corner at any given time (a statistical probability), meaning a more conservative portfolio, she likely wonʼt see her account balance drop quite so dramatically when the next downturn strikes.


3. If a 60-somethingʼs portfolio consists of, say, 90% high-risk stocks and 10% bonds, then sheʼs in big trouble, as she might have to draw from devalued securities and sell low. A more judicious allocation of bonds may have better tempered her portfolio from volatility.


A cautionary word about bonds: Not all of them are created equal. To help protect yourself in a bear market, you should consider looking for quality over quantity (of interest rate percentage points). Typically, high-quality bonds will not offer the highest growth rates.


Therefore, when shopping for bonds be wary of products offering an attractively high interest rate, as they usually
come with a high level of risk. In other words, think twice about taking equity-like risks with bonds. You might consider a gradual shift towards high-quality municipal, treasury and corporate bonds to help diversify your portfolio.


The bond market is volatile and can be significantly affected by adverse tax, legislative or political changes and the financial condition of the issuers of municipal securities. Interest rate increases can cause the price of a bond to decrease.


If history has taught us anything, it is that the unexpected should always be expected. If youʼre feeling anxious about your well-being in retirement, donʼt turn to your doctor for a remedy. Instead, meet for a one-on-one with a financial consultant who can help you address your needs.

As with a camping trip in the bear-inhabited wilds, the better prepared you are, the less chance a bear market may threaten your long-term plans.


Investing involves risk. No strategy can eliminate or anticipate all market risks and losses can occur. There is no guarantee that asset allocation reduces risk or increases returns.




Teachers Insurance and Annuity Association of America has sponsored Ask the Expert posts for informational purposes only. Many of the experts are unaffiliated with Teachers Insurance and Annuity Association of America, College Retirement Equities Fund, and their affiliates and subsidiaries (collectively TIAA), and TIAA makes no representations regarding the accuracy or completeness of any information on the posts or otherwise made available by the experts. Statements of external featured experts are solely their own and are not endorsed or recommended by TIAA.  Responses from experts to questions posed by Woman2Woman community members are intentionally general in nature and are not intended to give personal, financial, or specific advice.
Some strategies are complex, and more information is often needed to determine the personal needs of a community member. We strongly recommend that you consult with a financial advisor before taking any action based on an expert’s opinion or other information you obtain from the Woman2Woman:Financial Living site so that all of your personal circumstances can be taken into consideration. Participation in the site does not render the member a client of the expert or of TIAA.

This site is not designed to accept or respond to requests or complaints regarding specific TIAA accounts, products or services. If you wish to discuss an issue of that nature, please contact TIAA at 800 842-2252. TIAA is not responsible for any opinions provided by members of this site. TIAA is not responsible for the content or privacy policies of third-party sites to which you may link.

Any tax information provided is not intended to be used, and cannot be used, to avoid possible tax penalties. It was written to promote the products and services discussed. TIAA and its representatives do not offer tax or legal advice. You should consult an independent tax or legal advisor for advice based on your own particular circumstances.

The material is for informational purposes only and should not be regarded as a recommendation or an offer to buy or sell any product or service to which this information may relate. Certain products and services may not be available to all entities or persons.

Investment, insurance and annuity products are not FDIC insured, are not bank guaranteed, are not deposits, are not insured by any federal government agency, are not a condition to any banking service or activity, and may lose value. 

Experts may not have medical or scientific training. Any information related to physical or emotional health is not intended to be used in place of a consultation with a physician.  TIAA is not responsible for the statements of community members. We may link to posts made by community members only to direct you to topics that may be of interest to you. This does not mean that we agree with the opinions of these community members. Their statements are solely their own and are not endorsed or recommended by TIAA.  TIAA-CREF Individual & Institutional Services, LLC, Teachers Personal Investors Services, Inc., and Nuveen Securities, LLC, Members FINRA and SIPC, distribute securities products.© 2016 and prior years, Teachers Insurance and Annuity Association of America - College Retirement Equities Fund, New York, NY 10017