January 20, 2022

Retirement Parachute: How to Plan for Market Crashes, Ep #81

20 minutes

Your retirement nest egg has to last the rest of your life. There’s a lot at stake. So what happens when you face an emergency like a market crash? Because crashes are inevitable and a natural part of the cycle, you must plan for them. That’s why you need to get a retirement parachute in place. Learn more about why a retirement plan is so important in this episode of the Retirement Made Easy podcast.

You will want to hear this episode if you are interested in...

[5:31] Why you need a retirement parachute
[7:19] The most common emergencies
[12:35] Listener question about life insurance

Prepare for the worst with a retirement parachute

If you’re going on a cruise, you have to expect that there are lifeboats onboard to safely evacuate passengers if the need arises. They’ll likely have life jackets, fire extinguishers, floating devices, etc. The cruise ship plans for any emergency that may arise. It’s the same for fighter pilots. They’ll have a parachute to evacuate in case of an emergency. If you live in Oklahoma—known for tornadoes—you’ll have a storm shelter. The common theme? They all have an emergency plan.

Why you need a retirement plan

The market will crash—it’s not a matter of if, but when. What will you do if the S&P 500 or Dow Jones drops 30–40%? What if your corporate pension gets cut? So what do you do? Create your retirement parachute—i.e. your emergency plan.

Historically, when there’s a large market crash, like the 2008 crash or COVID, you can see the mutual funds and investments being sold off. It happens every single time. People sell because fear is a bigger emotion than greed. The fear of the unknown paired with temporary volatility makes people panic. If you don’t have a plan in place, you’re going to panic and make poor decisions that aren’t in your best interest. Don’t be a retiree caught without an emergency plan.

Need help creating a retirement plan that prepares you for market fluctuations? Connect with me at RetirementMadeEastPodcast.com!

Answering a listener question on life insurance

Do you need life insurance in retirement? I’ve met many people 60 and older who have life insurance but can’t tell me why.

I know a broker whose father worked for GM and his mother was a stay-at-home mom with 4 kids. His dad was injured at work and passed away from his injuries. At the time, his mom got a check from GM for a measly $5,000 life insurance policy. It wasn’t enough to do anything. So his mother married for financial support and was stuck in an abusive relationship until she died. She was never happy again. That’s why you need life insurance.

But fast-forward to retirement, when your house is paid off, your kids have grown up, and you have ample retirement savings. You have no liabilities. The truth is, you likely no longer need life insurance. When would you still want a life insurance policy? Listen to the episode to hear the reason(s)!

Resources & People Mentioned