How to Retire During a Market Crash

If you’re short on time, here’s the key takeaway:

• Let your investments recover—don’t sell in panic.
  
  
• Shift some funds to safer income streams like CPF LIFE or annuities.
  
  
• Keep a strong emergency fund to avoid selling investments at a loss.
  
  

Retirement is a milestone most people look forward to—after decades of working, saving, and investing. But what happens if the market crashes just as you’re about to retire? Imagine this: You’ve diligently built a $500,000 retirement portfolio, primarily in equities, only to see it shrink by $100,000—or 20%—within a matter of days.

It’s natural to panic. After all, your portfolio isn’t just numbers on a screen—it’s your future. But here’s the truth: a downturn doesn’t have to destroy your retirement dreams. It might delay them slightly or require some adjustments, but you can still retire confidently—even during turbulent markets.

Let’s walk through practical, actionable strategies to help you stay resilient, maintain income, and protect your nest egg during a market crash.

1. Delay Full Retirement or Work Part-Time

If possible, delay your retirement by a few years or take up part-time work. Even earning a modest income can ease the pressure on your portfolio. Here’s why this helps:

• Protects Your Capital: You avoid withdrawing from your investments when they’re down, giving them time to recover.
  
  
• Extends Your Time Horizon: Working just two or three more years can reduce your reliance on savings and keep your long-term plan intact.
  
  
• Eases Emotional Stress: Having income—even part-time—offers peace of mind in volatile times.
  
  

Did you know? Historically, the U.S. S&P 500 experiences a 20% drop roughly every six years, lasting around 13 months. If you don’t need to withdraw funds during that window, you’re more likely to come out fine once markets rebound.

Plus, part-time work can offer routine, purpose, and social interaction—while helping you ease into retirement gradually rather than abruptly.

2. Shift to Reliable Income Streams

If your retirement is around the corner and your portfolio has taken a hit, consider shifting a portion into safer income-producing options:

• CPF LIFE: This national annuity program offers monthly payouts for life, providing financial security regardless of market conditions.
  
  
• Private Annuities: These can complement CPF LIFE by offering guaranteed payouts for a fixed term or for life.
  
  

By matching these stable income sources with essential expenses like rent, healthcare, food, and utilities, you reduce the need to sell off equities when they’re down. That’s a smart way to avoid locking in losses.

Pro Tip: Always ensure your fixed income covers your non-negotiables. Let your more volatile assets ride out the storm until they rebound.

3. Avoid Taking on New Debt

It’s tempting to buy a new car or upgrade your home once you retire, but doing so during a market crash—especially with loans—can hurt your financial stability.

Here’s what to keep in mind:

• Rising Interest Rates: Borrowing costs may increase during economic instability.
  
  
• Falling Asset Values: If your investments shrink but your loan obligations stay the same, your debt-to-asset ratio worsens.
  
  
• Reduced Flexibility: Monthly payments eat into your retirement income and limit your financial freedom.
  
  

Instead, focus on simplifying your finances. Pay off existing loans if possible, avoid new debts, and ensure your lifestyle matches your current means.

4. Ensure You Have Enough Liquidity

Cash—or liquid, low-risk assets—are your best friend during a downturn. Having quick access to funds can prevent you from selling your investments at a loss. You should:

• Maintain at least 6–12 months’ worth of expenses in an emergency fund.
  
  
• Set aside funds for 1–5 years of retirement expenses in cash or near-cash instruments like fixed deposits or short-term government bonds.
  
  

This buffer allows your equity investments time to recover. It also buys you peace of mind, knowing that your daily needs are covered without touching your stocks.

5. Trim Unnecessary Expenses and Reassess Your Budget

In volatile times, it’s important to differentiate between what you want and what you need.

Here are a few ways to adjust:

• Postpone large discretionary purchases, such as renovations, luxury trips, or buying a second property.
  
  
• Cut back on non-essentials, like dining out frequently or impulsive online shopping.
  
  
• Review your recurring expenses—are there subscriptions or services you no longer use?
  
  

Reducing your withdrawals helps preserve your portfolio and gives it time to bounce back. Every dollar you don’t spend today is a dollar that can grow tomorrow.

6. Rethink Your Withdrawal Strategy

If you must tap into your investments during a crash, do it wisely. Instead of pulling evenly from all your holdings, try a more strategic approach:

• Withdraw from fixed-income assets first: Let your equities recover before touching them.
  
  
• Consider a “bucket strategy”: Divide your portfolio into short-term (cash), medium-term (bonds), and long-term (equities) buckets to manage risk and drawdowns more effectively.
  
  

This way, you’re not selling low—you’re letting your long-term investments ride out the volatility while still meeting your cash flow needs.

7. Review Your Retirement Plan as a Whole

Retirement isn’t just about money. It’s about having a complete plan that includes:

• Diverse Income Sources: Beyond CPF and annuities, explore rental income, part-time work, or dividend-yielding investments.
  
  
• Healthcare Coverage: Make sure your medical insurance is adequate, especially for long-term care needs. Healthcare costs are one of the biggest financial threats for retirees.
  
  
• Estate Planning: Create or update your will, nominate beneficiaries, and consider tools like Lasting Power of Attorney (LPA). A sound estate plan avoids unnecessary costs and delays for your loved ones.
  
  

Use the market crash as a moment to review your entire game plan—not just your portfolio.

8. Don’t Panic—Stay the Course

Perhaps the most important advice is also the simplest: Don’t panic.

Selling in a downturn often locks in losses. The markets have always recovered in the long run. Staying invested through the storm often leads to better outcomes than trying to time the market.

If needed, consult a financial advisor to help reassess your strategy, rebalance your portfolio, or offer perspective during uncertain times.