Boomers are in big trouble if the stock market keeps sliding
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- Baby boomers' hopes of retiring comfortably could be at risk if stocks keep falling.
- Older Americans could be forced to delay retirement, resume working, or cut back on spending.
- Retirement gurus shared a range of strategies to preserve their nest eggs.
Baby boomers' dreams of a comfy retirement are in jeopardy as a flagging stock market threatens to spoil their plans.
The benchmark S&P 500 index dropped 10% between February 19 and March 13 — a seven-month low — fueled by fears that the Trump administration's policies could tip the economy into recession. It's still in the red for 2025.
The sell-off has pinched older Americans' portfolios, shrinking their nest eggs and stoking worries about affording the retirement they imagined.
Most boomers are in their 60s and 70s, getting ready to exit the workforce or already in early retirement. They own stocks worth nearly $20 trillion — almost half the US market — between their direct holdings and 401(k)s, David Rosenberg, the president of Rosenberg Research and former chief North American economist at Merrill Lynch, told Business Insider.
They've "ridden the wave with nary a move to take profits, diversify, or rebalance," leaving them heavily exposed to market downturns and with limited time to recover losses, he said.
If their portfolios keep declining while they're withdrawing money to cover living expenses, they won't recover fully even if the market rebounds — a danger known as "sequence of return risk."
Rosenberg warned that if the pullback continues, "many will be forced to re-enter the labor market— packing bags at their local Walmart."
Those who refuse to sell stocks could find themselves "cutting back their retirement lifestyle spending like it's nobody's business — wave bye-bye to cruise lines, tablets/e-readers, and cosmetic surgeries," he wrote in a research note this week.
Sweeping fallout
"If these portfolio losses continue, we could be looking at a retirement crisis," Tim Schmidt, the founder and CEO of Gold IRA Custodians, told BI.
Millions might have to delay retirement by three to five years, creating a "workforce bottleneck" that blocks younger employees from advancing, he said. "For individuals, the consequences could be devastating — depleted savings, increased debt, and psychological distress."
Selling at lows might lock in permanent losses, Schmidt continued. Reduced spending could create a "negative feedback loop" that results in slimmer corporate profits, job losses, further asset price declines, pressure on housing markets as retirees abandon downsizing plans, and younger generations having to support parents whose "retirement funds have evaporated," he added.
Dan Doonan, the executive director of the National Institute on Retirement Security, said widespread delays in retirement could make it harder for businesses to control costs. If a recession hits, people might respond by saving less for retirement, further reducing their chances of comfort in old age.
The whole economy could suffer if retirees cut back when consumer spending is already under pressure. Markets could also be hit if more people are selling stocks to cover living costs, Mark Hamrick, Bankrate's senior economic advisor and Washington bureau chief, told BI.
Prepare for trouble
Current and future retirees might be tempted to cash out, fearing further declines for stocks. However, "making impulsive decisions, like pulling out of investments in a panic, can disrupt years of careful planning," Judith Ward, a thought leadership director at T. Rowe Price and a certified financial planner, told BI.
The "urge to react is high" in uncertain times, but overhauling investments or fleeing markets can backfire, Rita Assaf, a vice president of Fidelity Investments' retirement division, told BI. Investing too conservatively can result in less retirement income and a tougher time keeping pace with inflation, she said.
Doonan noted that markets typically recover within a few years, so "fear selling after prices collapse and buying back in after it 'feels safe' can leave you selling low and buying high."
However, Rosenberg urged boomers to "get their heads out of the sand" and recognize that bull markets don't last forever. He said the "best way to cushion the blow right now is to finally start the process of de-risking their portfolios and shift into cash, bonds and gold."
Assaf recommended a "diversified income plan" where a retiree covers essential costs such as food and housing with guaranteed income sources that keep up with inflation, such as Social Security and annuities. Then savings can be spent on non-essentials such as travel and hobbies, which are easier to cut back if required.
Bonds buffer
She recommended withdrawing no more than 4% to 5% of one's assets a year, and planning to cover healthcare expenses that typically exceed $165,000 from age 65 onward.
Ward advised maintaining a long-term view, rebalancing portfolios ahead of retirement to include more bonds as a "buffer" against volatility, automating contributions, and looking to cut expenses or delay large purchases in a down market.
She recommended having a separate cash account to avoid selling assets when prices are low, and considering working more years or having part-time jobs or side hustles in retirement to increase savings and delay withdrawals.
Sabino Vargas, a senior financial adviser at Vanguard, told BI that older investors can set themselves up for a successful retirement by ramping up contributions to their employer-sponsored plans, building a health savings account, and tapping their home equity if they move to a cheaper housing market.
Hamrick said investors should regularly review their risk appetite, asset allocation, and investment time horizon to make sure they're on track. He also advised paying down debts and boosting emergency savings to weather hard times.
Boomers rode the bull market to riches, but stocks don't care about their retirement plans. Unless they protect their nest eggs, they risk spending their golden years bagging groceries instead of lounging on the beach.