3 Questions Retirees Should Ask Before Retiring in a Bear Market

You've dreamed of retirement for years, and that day has nearly arrived. However, you've hit a bump in the road. Recent upheavals in the market have left you wondering if now is the right time to say goodbye to the job for good.

If you're worried about whether you're ready for retirement or concerned the U.S. may enter another bear market, here are three good questions to ask yourself.

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1. When was the last time I spoke with a financial advisor?

Even if you're a 100% do-it-yourselfer, allowing a professional to review your retirement plan is rarely a bad idea. The right mix of stocks, bonds, and cash is always a good idea, but when you're dealing with uncertainty, it's particularly important. Just as someone else may walk into your home and notice a needed repair you've long since forgotten about, a financial advisor may see holes in your portfolio that you've grown accustomed to.

A financial advisor is a good investment if you're looking to get through a bear market with barely a scratch and want to position your portfolio for long-term growth and stability. Chances are, they'll help limit the impact of the market downturn by suggesting you diversify even more, potentially including more international stock and high-grade corporate and municipal bonds. Or, they may look and tell you that your portfolio is perfectly positioned to ride out a bear market.

It doesn't hurt to pay for another set of eyes to examine your investments and offer suggestions as needed.

2. Is there another job I might enjoy?

Let's say you're counting down the days until you can retire and can't wait to pull out of your company's parking lot for the last time. Working through a bear market doesn't mean you have to stick with your traditional job. Go ahead and retire, but take the opportunity to look around for a position that allows you to earn just enough to cover your basic expenses. That way, you won't have to draw any money from your retirement account when the market is tanking.

The term sequence-of-returns risk (SORR) refers to the impact that timing can have on your portfolio. Let's say you retire during a bear market and must tap your retirement account for the money you need to cover bills. Any time you take money from a portfolio that's losing value, you must sell more of your investments to raise the amount of cash you require. On the other hand, working a part-time job or another position you enjoy can minimize the amount you need to pull from retirement, giving that money a chance to grow.

If the idea of working somewhere makes you want to pull your hair out, keep this statistic in mind: The average bull market (typically identified by a 20% rise in stock prices from recent lows, a strong economy, and high investor confidence) has historically lasted 965 days, or 2.65 years. The average bear market has lasted about 289 days, or 9.6 months. So even if you take on something new, you're not committing to it for life -- unless you later decide that you love it too much to give up.

3. Do I have the stomach to keep investing?

Long-term investors have learned through many bull and bear markets that it pays to stay the course. By continuing to invest regularly through a bear market, you position yourself to benefit as the market picks back up. On average, stocks lose 35% in a bear market. However, stocks gain an average of 111% during a bull market. That means the money you invest can gobble up bargain-priced assets like a Pac-Man character.

Dollar-cost averaging is an investment strategy that tends to work well when the market is soft. With dollar-cost averaging, you put a fixed amount of money into your account at regular intervals, which allows you to buy stocks at a lower price during bear markets. Ideally, those newly purchased stocks will increase in value as the market recovers and prices move northward, leaving you with a more valuable portfolio.

However, you must determine whether you have the stomach to continue investing when others are leaving. Whether a bear market is in full swing when you retire or the next bear market doesn't hit for a few years, it's good to be ready with enough cash to cover your everyday expenses until it passes. Whether you do that by putting money away in advance or you take on a new job for a while, the goal is to protect your assets.

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