Retirement preparedness · Bailey Financial Services

Preparing for a Market Downturn Near Retirement

Your savings are about to take on a different job. The portfolio you spent decades building may soon need to help pay your bills.

If markets fall sharply, where will your income come from? Which investments would you sell? How much room would you have to adjust?

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Wilder Bailey · Fee-only fiduciary · Watkinsville, Georgia

The withdrawal pressure test

The same spending. A smaller foundation.

A simplified illustration: start with $1 million and keep an annual withdrawal of $40,000 unchanged. As the portfolio falls, that withdrawal represents a larger share of what remains.

Starting balance

$1,000,000

4.0%

Annual withdrawal as a share of balance

After a 20% portfolio decline

$800,000

5.0%

Same $40,000 annual withdrawal

After a 30% portfolio decline

$700,000

5.7%

Same $40,000 annual withdrawal

After a 50% portfolio decline

$500,000

8.0%

Same $40,000 annual withdrawal

Hypothetical arithmetic, not a forecast, investment result, or recommended withdrawal rate. Balances are shown after the assumed decline and before withdrawals. Percentages equal $40,000 divided by each balance, rounded to one decimal place. Taxes, fees, inflation, recovery, and the timing of withdrawals are excluded.

Your portfolio would not necessarily decline by the same amount as stocks. What you own, how those investments behave together, and any changes made along the way would affect the outcome.

Why the timing matters

A downturn changes when you’re drawing income.

During your working years, you may have been able to keep contributing through a downturn. In retirement, you may need to take money out while investments are losing value.

Selling investments after a decline leaves fewer assets participating in a recovery. Poor returns early in retirement, combined with withdrawals, can therefore have lasting consequences. This is called sequence-of-returns risk.

A retirement plan needs to account for when losses occur, how much you withdraw, and how long a recovery might take.

Read the source: understanding sequence-of-returns risk ↗

Explore the other pressure on retirement income:see how inflation could affect your cash flow with the Retirement Inflation Calculator.

Five areas to review

Before markets put your plan to the test.

The income your portfolio must provide

Start with essential spending. How much is covered by Social Security, a pension, or other dependable income? How much must come from investments? That gap helps define what your portfolio needs to accomplish.

Where withdrawals would come from

Identify which resources could cover spending during a prolonged downturn. Cash and other lower-volatility holdings can provide flexibility, but they also involve tradeoffs, including inflation and lower growth potential. The right balance depends on your circumstances.

How concentrated your investments really are

Owning several funds does not necessarily mean you own different underlying investments. Review overlapping holdings and large positions in individual companies. For utility employees and retirees, company stock deserves particular attention alongside pension and other employer-related benefits.

Diversification can reduce concentration risk, but it cannot guarantee against market losses.

Explore company-stock concentration risk →

Your flexibility if conditions change

Consider which expenses could be postponed, whether your retirement date has flexibility, and how different withdrawal amounts would affect the plan. Knowing your options beforehand can make difficult decisions more manageable.

How investment decisions would be made

What would prompt a portfolio adjustment? What would justify staying the course? How would taxes, income needs, and the possibility of a recovery influence those decisions? A useful plan also considers continued market gains and the cost of becoming too defensive too soon.

The other side of preparation

What if the decline doesn’t come?

A severe decline deserves a plan.

A 30%, 40%, or 50% stock-market decline is a scenario worth examining when retirement income depends on investments. Consider the effects on spending, withdrawals, and your ability to remain invested.

So does a continued advance.

Markets can keep rising, and a feared decline can arrive much later than expected—or fail to occur. Becoming too defensive can mean missed growth, lost purchasing power, and difficult decisions about when to invest again.

Preparation should leave you with a plan you can follow across different outcomes.

Bring it back to your household

Turn market concerns into decisions.

The concern

The decision to work through

Stocks fall sharply.

Which resources would cover your spending?

A recovery takes years.

How much must your portfolio provide, and what could you adjust?

One company dominates your holdings.

What concentration level fits your overall retirement needs?

Markets keep rising.

How will your plan balance near-term income with long-term growth?

My perspective

The life your savings need to support comes first.

I believe a major market reset is a risk worth taking seriously. Its timing and size are uncertain, so preparation should consider several possible outcomes. This is my planning perspective, not a forecast.

At Bailey Financial Services, I help retirees and people approaching retirement think through these questions—and connect the answers to how their money is managed.

My work includes Southern Company, Georgia Power, and Southern Nuclear families facing company-stock, pension, and rollover decisions. Our conversation starts with your income needs and portfolio risks, and whether ongoing investment management with Bailey Financial Services is a fit.

Wilder Bailey

Founder, Bailey Financial Services, Inc.
Fee-only fiduciary investment adviser · Watkinsville, Georgia

Your five-question check

Can you answer these today?

How much of my essential spending must come from investments?
Where would my withdrawals come from during a prolonged downturn?
How much of my retirement depends on a single company?
What could I adjust if markets fell early in retirement?
What would guide investment decisions if markets fell—or kept rising?

Start with a closer look

Give your retirement concerns a place to begin.

If a major decline would change when you retire, how you live, or how secure you feel, those concerns deserve attention now.

Start a Conversation with Wilder

No pressure, no obligation.

Prefer to begin on your own?

Take the two-minute Portfolio Preparedness Review. Your educational result comes before any request for contact information.

Take the Portfolio Review →

Watkinsville, Georgia

Wilder@BaileyFS.net

Sources and methodology

Sources reviewed September 6, 2026. The illustration on this page uses hypothetical arithmetic rather than historical market data or expected investment performance.

Charles Schwab: What Is Sequence-of-Returns Risk? ↗Investor.gov: Asset Allocation and Diversification ↗

Bailey Financial Services, Inc. is a fee-only, state-registered investment adviser. Registration does not imply a particular level of skill or training. This material reflects the author’s analysis and opinion, is educational, and is not individualized investment, tax, or legal advice or a recommendation to buy or sell any security. Investing involves risk, including loss of principal. No investment strategy guarantees a profit or prevents losses. Bailey Financial Services is not affiliated with, endorsed by, or sponsored by Southern Company, Georgia Power, or Southern Nuclear. External resources are provided for education and do not imply endorsement in either direction.