A recent essay by Charles Hughes Smith has been circulating among clients and advisors. The title is deliberately blunt: Sell Now: Here's Why. Smith describes a conversation with a younger family friend — an entrepreneur who recently took on significant debt to buy a rural property and expand a business — in which he laid out the case for reducing obligations before conditions tighten further.
I don't endorse the headline. "Sell everything" is rarely the right answer for a retiree or pre-retiree, and anyone issuing that kind of instruction to a broad audience is either selling newsletters or flying blind. But underneath the provocation, Smith is pointing at something real — a dynamic I've watched play out in every recession I've lived through, and one that retirees in particular should understand.
The dynamic is this: in a real downturn, the exit door closes much faster than most people believe possible.
The recency bias trap
Smith's clearest example is the housing market. When home values have risen for years, sellers anchor to recent peaks. A house that comfortably sold for $850,000 in a hot market doesn't get listed at $775,000 when conditions shift — it gets listed at $825,000, because the seller is mentally subtracting a "small discount" from what they believe the house is still worth.
In a recession paired with tight credit, that listing sits. Buyers pull back. Lenders tighten. Months pass. By the time the seller finally accepts reality, the realistic clearing price isn't $775,000 — it's $600,000, or the house goes to foreclosure. The people who cut decisively in the first 60 days get out. The people who wait for the rebound get trapped.
This isn't specific to housing. It applies to concentrated stock positions, vacation properties, small-business equity, collector assets — anything illiquid where "recent price" is mistaken for "current value." The mistake is treating the last sale as the floor, when in a tightening cycle the last sale is the ceiling.
The credit-system signals worth watching
Smith argues that headline indicators — GDP, the unemployment rate, the stock market — are easily gamed or lag reality. What's harder to distort is the behavior of the credit system itself: who's borrowing, who's lending, who's pulling cash out of long-term accounts to cover short-term shortfalls.
One data point he cites is worth looking at directly. According to Vanguard's How America Saves 2026 report, roughly 6% of participants in 401(k) plans it administers took a hardship withdrawal in 2025. That's up from 4.8% in 2024 and compares to a pre-pandemic baseline of about 2%. The top reasons: avoiding eviction and paying medical bills.
Hardship withdrawals aren't a market indicator. They're a household-stress indicator. They tell you something about the pressure building underneath the consumer-spending numbers the headlines report. When households are raiding retirement accounts in record numbers while the labor market still reads as "strong," the two signals are telling different stories — and the credit system is usually the one telling the truer one.
Other signals in the same category: rising delinquencies on auto loans and credit cards, tightening bank lending standards, private credit funds gating redemptions, commercial real estate writedowns that don't make headlines. None of these individually forecasts a recession. Collectively, they describe the condition of the system that has to keep functioning for "risk-on" to continue working.
Where I part company with Smith
Smith's prescription — sell whatever it takes to eliminate debt — is the kind of advice that sounds decisive in an essay and looks reckless in a real financial plan. For a pre-retiree or retiree, "sell everything" creates its own risks: tax consequences, locking in losses, leaving capital on the sidelines during a recovery, disrupting an income-generating portfolio to pay off a low-rate mortgage that wouldn't default anyway.
Debt reduction is a valuable goal, but it has to be weighted against liquidity, tax efficiency, legacy intentions, and what the debt is actually financing. A 3% mortgage on a paid-down balance is not the same problem as a variable-rate business line of credit or a HELOC funding lifestyle expenses. The generic "sell now" framing flattens distinctions that matter a great deal.
What is worth taking seriously
Three ideas from Smith's piece are worth sitting with, even if you set the headline aside:
One — liquidity matters more than it appears to
In a normal market, illiquid assets feel fine because you can always sell if you need to. In a tight market, "always" becomes "maybe" and then "not at the price you want." Retirees who depend on a portfolio for income should know, specifically, how much of their assets can be converted to cash in 30 days without a meaningful haircut. That number tends to be smaller than people assume.
Two — recency bias is the enemy
The most expensive mistake in any downturn is refusing to mark positions to current reality. This applies to houses, to concentrated stock, to business valuations, and to spending plans. If the environment has changed, the plan has to acknowledge it — not six months from now, when conditions have already deteriorated further.
Three — debt is a speed limit on your options
Debt doesn't cause recessions, but debt determines how many options you have when one arrives. A household with modest fixed obligations and adequate cash reserves can wait out almost any downturn. A household carrying significant variable-rate debt, or debt whose payment depends on continued strong income, has far less room to maneuver. For anyone near or in retirement, the goal isn't zero debt — it's enough flexibility that a deep recession doesn't force decisions on your schedule.
What this means for retirees
I'm not predicting a recession. Smith isn't predicting one either, at least not literally — his framing is "if you see these things start happening, respond accordingly." That's the right framing. The value of this kind of commentary isn't in the forecast; it's in the reminder that conditions can change faster than most plans assume, and that the best time to make defensive adjustments is before you need them.
For clients, the practical questions are unglamorous ones. How much liquidity do you hold? What percentage of your income depends on assets whose value could reset meaningfully? What debts could become uncomfortable if rates stay high or income softens? When was the last time your spending plan was stress-tested against a real downturn — not 2022's shallow pullback, but something closer to 2008?
None of these questions require predicting the future. They only require being honest about the present. And in my experience, that honesty — done before conditions force it — is the single biggest differentiator between retirees who weather recessions comfortably and retirees who don't.
The door doesn't slam shut on everyone at once. It slams shut on the people who were still planning to act later.
