The market’s been rocky lately, and it’s hard not to notice.

Your mind spirals with “what ifs” when you wake up from a deep sleep at 2am.

The news keeps reporting big and sudden market drops.

You can’t help but start worrying about how this will affect your retirement plans.

Bear markets are frightening, and you no longer have time to wait them out. You’re not sure if you need to keep working a few more years – even though you might have had your heart set on a specific retirement date.

• Will you have to drop the plans you’ve made to visit the kids and grandkids?
• Will you still be able to travel the world?
• Can you still indulge in your favorite hobbies?
• How many more years of waking up to an alarm clock might be in your future?

Perhaps you’ve already filled out your paperwork to leave when suddenly the market starts dropping – and doesn’t bounce right back up. Or you’re not able to keep working, and you no longer have the luxury of a salary coming in to pay your bills. Has your world just fallen out from under you?

Here are critical answers you need today:

• Should you retire when the market’s so bleak?
• Do you have to give up most (or all) of your dreams for retirement?
• What can you expect when retiring in uncertain times – and what can you do about it?

Although times are scary, know that bear markets too shall pass. You’re not the first to consider retirement in a declining market with potential losses. History shows there are successful ways to retire, even when the market outlook is bad. You can tap into this knowledge to help you make decisions.

This no-nonsense guide is for people just like you – who are ready to retire in the next 5 years and who need to make big retirement decisions in the face of a big stock market drop. You’ll discover what to expect when rocky markets hit retirees. And, more importantly, what you can do about it.

You may be asking yourself questions such as:

• Am I able to retire when I want to?
• Will I need to give up on my bucket list?
• Is there a need to find a part-time job just to get through?
• What can I do with my investments to help me navigate the storm?
• Do I have a trusted professional who can discuss my concerns with me?

If any of these strike a chord with you, then keep reading…

When stocks rise in the midst of a “bull market,” it’s easy to take on more risk than you would otherwise prefer: you’re experiencing the reward side of the risk/return coin.

But when the market drops 20% or more (the technical definition of a “bear market”), you’re facing the risk side.¹ And that’s often very uncomfortable.

Ideally in retirement you’d like to be able to wake up every day without worrying about your money! If you have too much of your money in stocks, you’ll be anxious and unsettled about your future every time you hear about a market drop. Instead, balance your stocks and bonds with cash to balance your risk (and sleep well for your entire retirement).

You’ve probably created your retirement “bucket list,” but those aren’t the most important buckets when it comes to finances.

Throughout retirement, you’ve got three periods of time with their own “bucket” of money.

In the first period – the next year – you need cash for expenses. Figure out what your costs will be in the next twelve months, and make sure that you have enough cash for them.

That way, if the market suddenly takes a steep hit, you don’t have to worry. You already have money that won’t lose its value no matter what’s happening in the stock market. But cash loses ground to inflation, which is why you only want one bucket of cash.

The next period of time is within the next five to seven years, and this bucket is best with bonds (which provide fixed income). You’ll have some income thanks to the interest payment or coupon on the bond.

This bucket also doesn’t fluctuate with the stock market. When you start running low on cash, you can sell some of your bonds. Whether the stock market’s in decline or not doesn’t affect their value.

In our low interest rate environment, cash and bonds don’t keep up with inflation over the long term. So you need stocks (equities) in the third bucket, which will allow your money to compound over the years. As the cash and bond buckets run low, you replenish them by selling stocks – but only when the stock market is performing well.

Critical questions to ask yourself:

• Am I taking too much risk to sleep at night when the market “goes bad?”
• Do my current investments fit this “bucket” system, or should I make some changes?
• Given my personal circumstances, how much money should I have in each bucket?
• Is there a financial professional I trust to help me make these decisions?

Many people dread a bear market or fear a potential loss when stocks decline. But as long as you don’t sell them when prices are low, you won’t realize any losses. Use Retirement Peacemaker #1 to make sure that you have money for expenses that doesn’t rely on stocks.

In addition, make sure you have some cash for potential opportunities. Everyone loves to buy cars and shoes when they’re on sale. You may belong to rewards programs at big-box and grocery stores to buy your items at a discount. Why not your stocks too?

Maybe there are some stocks that you’ve always wanted to own, but they’re only affordable in the bear market. Or maybe you want to increase your income from your stocks, so you consider buying dividend-paying stocks with a history of increasing dividends over the years.

A bear market can be a chance to reallocate your portfolio if you need to. Don’t let the (understandable) fears of market declines prevent you from taking advantage of them. Whatever the opportunity might be, you need to be ready and confident in your decisions to capture it.

Critical questions to ask yourself:

• Are there any companies or industry sectors that I’m interested in investing in, but the prices are too high?
• Do I have the confidence to buy when everyone else is anxious about the market?
• Am I ready to seize the possibilities that open up?
• Is there a financial professional who can guide me to any opportunities I might be missing in a bear market?

As the saying goes, proper prior planning prevents poor performance!

With a financial plan that’s stress-tested through multiple return scenarios (known as Monte Carlo analysis), the numbers will demonstrate if you need to make changes. Whether you need to work longer, take a part-time job in retirement, reduce (or eliminate) your bucket list – or none of the above.

Stock market declines are scary and often investors fear the worst. But that doesn’t mean that your fear is necessarily well-founded.

On the other hand, you may find that working an additional year or two could make a huge difference to your retirement. Discovering this ahead of time gives you the ability to choose. You might decide that you’re willing to defer your retirement dream for a bit longer. Or you may want to give up a few lifestyle items or downsize instead in order to retire when you want.

When you can see the likely effects of different decisions on your retirement years, you hold the power in your hands.

A bear market just as you retire may not mean anything, or it may mean tightening your belt for a few years. The only way to know is to understand what your retirement dream actually looks like to you and your family, and then assess your money and income – such as Social Security – to determine whether you can rely on it in good market times and bad.

A financial professional has the software to run these complex scenario analyses, but you’re the only one who can supply the details of your financial goals and dreams.

Critical questions to ask yourself:

• Do I understand what retirement means for me and my family?
• Is there a plan in place for my retirement where my income, assets, and expenses are mapped out?
• What is my fallback if the plan shows I can’t retire when I want to?
• Do I have a financial professional on my side who can work with me on a retirement plan?