• 4-Minute Article
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  • Jun 29, 2020

4 Retirement Planning Lessons From the Past to Help You Navigate the Current Economy

Find out what actions you can take to help protect your plans for retirement.

4 Retirement Planning Lessons From the Past

Updated: June 3, 2022

Created in Collaboration with Kiplinger.

Questions this article can help you answer:
  • How can I protect and manage my retirement savings during a recession?
  • What happens in a recession?
  • What can I learn from past market volatility?

As many investors recovered from the financial crisis of 2008, they learned valuable lessons in retirement planning. Though the current economic situation stems from a global pandemic, and past performance is no guarantee of future results, there are some earlier lessons worth drawing from that could be useful in today’s environment.

Lesson 1: Stay the Course With Your Investments

In 2008, the market’s long-term impact on retirement portfolios depended in part on investors’ reactions. Leading up to today’s economic uncertainty, Jeffrey S. was still living with the results of portfolio moves he made more than a decade earlier.

During the financial crisis, the value of Jeffrey’s individual retirement account (IRA) dropped 75%, and he later missed the market rebound that began in March 2009 since he withdrew funds. He tried other trading strategies to recover his losses, but nothing worked.

That unfortunately moved the time horizon for his retirement. “After the crash, it was apparent to me I could not retire at 60, which had been my goal,” explained Jeffrey, who conceded that he and his wife had to temporarily put their vision of retirement on hold.

How to put this lesson into practice:

  • Know what you can control – markets are unpredictable, but you can put a long-term plan for retirement in place
  • Work with your financial professional to create strategies to help give you some peace of mind in times of market volatility
Market losses of almost 30% in the fourth quarter of 2008 were fully recovered by the end of 2010.

Source: Faced with a Sudden Real Threat, Will Investors Learn from Lessons of the Past? Quantitative Analysis of Investor Behavior; DALBAR, Inc.; March 31, 2020.

Lesson 2: Turn Market Uncertainty Into Opportunity

Paul F. saw the 2008 financial crisis as the best thing that ever happened to him financially. But it didn’t start out that way. In October 2007, at the stock market’s peak, Paul invested the $150,000 proceeds from the sale of his Baltimore home into the market. That money then went through many market swings, but he stayed the course. “I figured [that money] would come back at some point,” he said. “I ignored the news and kept putting money into my investments the whole time.”

This slow-and-steady approach allowed Paul to pick up stocks at attractive prices near the market’s lows, putting the software engineer from San Francisco on track to retire early and increasing his investing confidence during times of market volatility. “I feel like I have enough [money] now that I can afford the volatility,” he stated.

How to put this lesson into practice:

  • Find opportunity in down markets by adopting a disciplined and long-term approach
  • Gain long-term portfolio stability by looking beyond the daily headlines and asking your financial professional to put market performance in perspective

Lesson 3: Position Your Portfolio for Resilience

Bill A. from Wisconsin, who retired five years ago from his accounting career, favored defensive, dividend-paying stocks such as food and pharmaceutical companies. Those types of holdings served him well during the 2008 financial crisis. At the time, his portfolio lost only about 25%, while the S&P 500® IndexA dropped 57% from its 2007 peak to its 2009 low.2

“You can’t wait until you retire to get defensive with your investments,” Bill explained. “You have to do it in advance.”

How to put this lesson into practice:

  • Consider ways to diversify your portfolio to prepare for market volatility
  • Ask your financial professional about devoting a portion of investment holdings to market sectors that may be more resistant to market downturns

Boom or Bust: S&P 500 Historical Annual Returns

Source: S&P 500 Historical Annual Returns. Macrotrends, as of May 2020.

Lesson 4: Prepare for the Unexpected

GW P., a former chemistry teacher in Georgia, retired in 1995 with a strategy of keeping a cash reserve in the bank to cover 18-24 months’ worth of expenses at any given time. That approach became a portfolio-saver during the market downturn more than a decade ago. Because he didn’t need to sell any of his investments to cover his living expenses, GW instead pulled money from his cash reserve to help pay the bills.

How to put this lesson into practice:

  • Maintain a robust emergency fund, which can offer confidence during financial challenges
  • Connect with your financial professional to see whether adjusting cash holdings makes sense as circumstances change


Learn more about protecting your retirement from market volatility in 3 Questions to Ask Your Financial Professional During Market Volatility.