The Bucket List – Sort Of
The stock market can be a wild rollercoaster. Over the past 40 years, we’ve seen some of the largest market drops in history, and while the market has always recovered, the journey back to baseline isn’t always a quick one. When you pair that with the fact that many of us, particularly those in our 70s and 80s, may not have the luxury of waiting years or even decades for a full recovery, the stakes become even higher. This is why having contractual income provisions in place—ones that guarantee steady income—becomes not just important, but essential.
Let’s take a look at some of the most significant stock market drops in the last four decades and see how long it took to bounce back. For instance, during the 1987 crash, known as Black Monday, the market dropped 22.6% in a single day. It took about two years to recover to its previous high. The dot-com bubble burst in 2000 wiped out 49% of the market, with the recovery taking seven years. The 2008 financial crisis? It knocked the market down by 57%, and it took six years to recover. And then there's the COVID-19 crash in 2020, which, despite being sharp, recovered relatively quickly within a matter of months. Each of these instances carries its own lessons, but one thing is clear: market drops can take a long time to mend.
Now, let’s contrast that with the average life expectancy of someone in their 70s or 80s. The average 70-year-old man in the U.S. today can expect to live another 14-16 years, and a 70-year-old woman can expect to live another 16-18 years. In our 80s, the numbers drop, of course, but we’re still looking at an average of 7-9 years of life expectancy. In comparison to stock market recoveries, these timeframes start to paint a concerning picture.
If you’re in your 70s or 80s and you experience a significant stock market drop, it’s entirely possible that you might not live long enough to see a full recovery. I know that sounds harsh, but it’s a reality too many people don’t take seriously enough. Many of us have spent our lives focused on growth—building our wealth, expanding our investments, and chasing that next big win. But the truth is, there comes a point when the focus has to shift. As we age, we need to prioritize income over growth. We need to ensure that we have enough reliable income coming in to live comfortably for the rest of our lives, regardless of what the stock market does.
Stress is another crucial factor that many overlook. When the market drops, people lose sleep. They panic, and they make rash decisions. But what we often don’t realize is the toll that stress takes on our health. Numerous studies have shown that chronic stress, like the kind we experience when watching our retirement savings shrink, can reduce life expectancy. For those of us in our 70s and 80s, that stress can have an even more significant impact, leading to heart problems, strokes, and a diminished quality of life. The very thing we’re stressing about—whether we’ll have enough money to live on—can actually shorten the time we have left.
This is why contractual income provisions are so critical. These are tools that ensure you receive a guaranteed income for life, regardless of what happens in the stock market. Annuities are one example of this, though they’re not the only option. The idea is to segregate your money into two distinct categories: growth-focused and income-focused. The money you need to live on, to pay your bills, and to enjoy your retirement should be in that income-focused bucket, where it’s safe from the ups and downs of the market. The growth-focused bucket, on the other hand, can be used for more long-term investments, where you can afford to take some risks, knowing that your basic income needs are covered.
Another factor that many people overlook is what I call the “Five Deadly D's”: death, disability, division (as in divorce or family splits), discharging debt, and destruction (like natural disasters or personal emergencies). Any one of these can strike at any time, and if they happen while the market is down, the financial impact can be far worse than you’d expect. When life throws you one of these curveballs, you might be forced to dip into your investment assets beyond your usual cash holdings, pulling money out when your portfolio is already struggling. This can seriously exacerbate the damage, because now you’re locking in those losses rather than giving your investments the time they need to recover. If the market’s already down and you have to sell assets to cover the costs of one of these D’s, you’re potentially taking a double hit—losing both the growth potential of those assets and compounding the losses from selling in a downturn. It’s a reminder that life doesn’t wait for the market to recover, and you need to be prepared with a strategy that takes these unexpected challenges into account.
Too many people focus on the wrong things at the wrong time in their lives. They stay overly invested in growth-focused investments well into their retirement years, leaving themselves vulnerable to market drops. Then, when the market does fall, they’re forced to sell investments at a loss, further damaging their financial security. It’s a vicious cycle, and one that’s entirely avoidable with proper planning.
This is where having a true fiduciary-based financial advisor becomes absolutely critical. A fiduciary advisor is legally obligated to act in your best interest, unlike many other financial advisors who may be more concerned with earning commissions on the products they sell. A good fiduciary advisor will help you create a plan that balances growth and income, and ensures that you have enough guaranteed income to live on, no matter what happens in the stock market.
In conclusion, the stock market is a long game. While it may recover over time, the reality is that many of us may not have the time to wait for that recovery, especially in our later years. The stress of watching the market rise and fall can have real consequences on our health and longevity. That’s why it’s so important to have a financial plan in place that focuses on providing steady income, even in the face of market downturns. Segregating your money into growth-focused and income-focused categories, and working with a fiduciary-based advisor who truly has your best interests at heart, can make all the difference in your retirement. Don’t wait until it’s too late—plan for your future today and give yourself the peace of mind you deserve.
Let’s take a look at some of the most significant stock market drops in the last four decades and see how long it took to bounce back. For instance, during the 1987 crash, known as Black Monday, the market dropped 22.6% in a single day. It took about two years to recover to its previous high. The dot-com bubble burst in 2000 wiped out 49% of the market, with the recovery taking seven years. The 2008 financial crisis? It knocked the market down by 57%, and it took six years to recover. And then there's the COVID-19 crash in 2020, which, despite being sharp, recovered relatively quickly within a matter of months. Each of these instances carries its own lessons, but one thing is clear: market drops can take a long time to mend.
Now, let’s contrast that with the average life expectancy of someone in their 70s or 80s. The average 70-year-old man in the U.S. today can expect to live another 14-16 years, and a 70-year-old woman can expect to live another 16-18 years. In our 80s, the numbers drop, of course, but we’re still looking at an average of 7-9 years of life expectancy. In comparison to stock market recoveries, these timeframes start to paint a concerning picture.
If you’re in your 70s or 80s and you experience a significant stock market drop, it’s entirely possible that you might not live long enough to see a full recovery. I know that sounds harsh, but it’s a reality too many people don’t take seriously enough. Many of us have spent our lives focused on growth—building our wealth, expanding our investments, and chasing that next big win. But the truth is, there comes a point when the focus has to shift. As we age, we need to prioritize income over growth. We need to ensure that we have enough reliable income coming in to live comfortably for the rest of our lives, regardless of what the stock market does.
Stress is another crucial factor that many overlook. When the market drops, people lose sleep. They panic, and they make rash decisions. But what we often don’t realize is the toll that stress takes on our health. Numerous studies have shown that chronic stress, like the kind we experience when watching our retirement savings shrink, can reduce life expectancy. For those of us in our 70s and 80s, that stress can have an even more significant impact, leading to heart problems, strokes, and a diminished quality of life. The very thing we’re stressing about—whether we’ll have enough money to live on—can actually shorten the time we have left.
This is why contractual income provisions are so critical. These are tools that ensure you receive a guaranteed income for life, regardless of what happens in the stock market. Annuities are one example of this, though they’re not the only option. The idea is to segregate your money into two distinct categories: growth-focused and income-focused. The money you need to live on, to pay your bills, and to enjoy your retirement should be in that income-focused bucket, where it’s safe from the ups and downs of the market. The growth-focused bucket, on the other hand, can be used for more long-term investments, where you can afford to take some risks, knowing that your basic income needs are covered.
Another factor that many people overlook is what I call the “Five Deadly D's”: death, disability, division (as in divorce or family splits), discharging debt, and destruction (like natural disasters or personal emergencies). Any one of these can strike at any time, and if they happen while the market is down, the financial impact can be far worse than you’d expect. When life throws you one of these curveballs, you might be forced to dip into your investment assets beyond your usual cash holdings, pulling money out when your portfolio is already struggling. This can seriously exacerbate the damage, because now you’re locking in those losses rather than giving your investments the time they need to recover. If the market’s already down and you have to sell assets to cover the costs of one of these D’s, you’re potentially taking a double hit—losing both the growth potential of those assets and compounding the losses from selling in a downturn. It’s a reminder that life doesn’t wait for the market to recover, and you need to be prepared with a strategy that takes these unexpected challenges into account.
Too many people focus on the wrong things at the wrong time in their lives. They stay overly invested in growth-focused investments well into their retirement years, leaving themselves vulnerable to market drops. Then, when the market does fall, they’re forced to sell investments at a loss, further damaging their financial security. It’s a vicious cycle, and one that’s entirely avoidable with proper planning.
This is where having a true fiduciary-based financial advisor becomes absolutely critical. A fiduciary advisor is legally obligated to act in your best interest, unlike many other financial advisors who may be more concerned with earning commissions on the products they sell. A good fiduciary advisor will help you create a plan that balances growth and income, and ensures that you have enough guaranteed income to live on, no matter what happens in the stock market.
In conclusion, the stock market is a long game. While it may recover over time, the reality is that many of us may not have the time to wait for that recovery, especially in our later years. The stress of watching the market rise and fall can have real consequences on our health and longevity. That’s why it’s so important to have a financial plan in place that focuses on providing steady income, even in the face of market downturns. Segregating your money into growth-focused and income-focused categories, and working with a fiduciary-based advisor who truly has your best interests at heart, can make all the difference in your retirement. Don’t wait until it’s too late—plan for your future today and give yourself the peace of mind you deserve.