Stock Market Crash Survival Guide For Retirees

The 2025 stock market crash occurred at a lousy time for retirees, especially those who just recently stopped working.

Just a short time after saying goodbye to steady paychecks, President Donald Trump’s decision to slap tariffs on U.S. trading partners around the globe sent the stock market into free fall amid recession fears.

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The S&P 500’s nearly 20% drop from its recent high put a sizable crack in retirement nest eggs. Despite a rally on April 9, the damage was still felt. For aging Americans, visions of golden years quickly turned to fears of making ends meet each month. And, for some, the prospect of running out of money later in retirement grew.

“This moment is a strong reminder of why it is so important to have a retirement strategy with protection built in,” said Kelly LaVigne, vice president of consumer insights at Allianz Life Insurance Company of North America.

The Best Protection From Stock Market Crash

The best protection, of course, is having a diversified portfolio of stocks and bonds that matches your risk tolerance and long-term goals. Your finances are even more fortified if you also have built-in income streams, such as Social Security, a pension or an annuity to cover your bills until the market recovers.

So, if your portfolio can truly weather the current financial storm, there’s no reason to panic. Or make drastic changes to your holdings due to paper losses in the stock portion of your portfolio, says Brad Bartick, a wealth planner at Baird.

“If you can honestly say that you own a well-diversified portfolio of high-quality assets, then you should be very leery about straying from that course in the face of a market downturn,” said Bartick. “Definitely stay the course.”

Keep Emotions In Check

Controlling your emotions is also key. Keep your losses in perspective. You don’t want to make matters worse by making poor financial decisions based on fear.

The market already has a lot of bad news priced in. Through April 7, the S&P 500 on a closing basis fell 17.6% from its Feb. 19 high. That’s 2 percentage points more than the average maximum drawdown for the benchmark index since 1998, according to data from Oppenheimer Asset Management.

So, bailing out of stocks means you risk missing out on the eventual rebound. “Panic never serves a portfolio well,” said Chris Grisanti, chief market strategist at MAI Capital Management.

The Source Of The Stock Market Crash Pain

While most bear markets are caused by things like excessive stock overvaluation or some kind of financial shock like a credit crunch, the current sell-off has been self-inflicted due to the White House’s tariff policy.

There’s nothing to say a positive headline regarding a breakthrough in tariff negotiations won’t spark a sharp rebound rally like the intraday 8%-plus move Monday on a what proved to be a false rumor of the Trump administration putting a 90-day hold on tariffs. There was also a sharp rally on April 9 as Trump backed down from some tariffs.

Since the 2008-09 financial crisis, the S&P 500 has fallen more than 10% on 11 occasions. Yet it’s up more than 600% since its 2009 low.

Stay Balanced During Stock Market Crash

If you are retired or nearing retirement, you most likely have a balanced portfolio. That’s good. Why? The bond portion of your portfolio provides ballast and downside protection.

Let’s say you have a 50-50 mix of stocks and bonds. If your 401(k) was valued at $1 million before the recent market downdraft and the stock portion is down 20% but bonds held their value, your account balance has dipped to just $900,000, rather than $200,000 to $800,000 if your portfolio was 100% stocks. Put another way, you’re not down 20%, but just 10%.

Doing that type of portfolio return math can help you realize your 401(k) is in better shape than you thought.

“If you have a diversified portfolio, the downturn probably feels worse than (your losses actually are),” said Tom Hainlin, senior investment strategist at U.S. Bank Wealth Management.

Recalibrate Your Mindset

Another way to stave off despair is to tally your losses from a year-to-date perspective rather than the most recent market high. Through Monday’s close, for example, the S&P 500 was down nearly 18% from its peak, but only off 14% year-to-date. Again, that means a balanced portfolio is down closer to 7%.

If you’re in a position where you must raise capital from your investment accounts to fund your lifestyle, the math gets a bit more complicated. “You have to pick and choose between different alternatives,” said Noah Harden, national wealth planning manager at Comerica Bank.

The reason: Selling stocks at depressed prices could cause a faster depletion of your nest egg and leave you with less shares in your account to profit from the eventual rebound.

“If you liquidate investments that are down, you’re going to be in a bigger hole because those investments won’t be there anymore to grow over time,” said Harden. “Selling (depressed stocks) is going to accelerate the depreciation of those assets in the long term.”

Take Withdrawals Carefully

In that case, the strategy is all about making withdrawals from accounts that cause the least long-term damage to your retirement portfolio, says Hainlin. “If you’re in a scenario when you need cash today, then you have to take action today,” said Hainlin.

The first place to raise cash is from cash savings. So, hopefully you have three, six or 12 months’ worth of living expenses sitting in a high-yield savings account that serves as your emergency fund.

Next in the pecking order is taking withdrawals from the fixed-income portion of your portfolio. This asset class is in the plus column in 2025. Pulling from winners such as bonds lets you avoid taking distributions from battered stocks.

Rebalance With Care

To conserve cash during tough times, Hainlin also recommends taking a cautious approach to rebalancing your portfolio’s asset allocation. The decline in stocks means your stock allocation is less than the asset mix outlined in your financial plan. “We don’t think you should be in a big hurry to sell bonds to buy stocks in this market,” said Hainlin.

Take a slower, more methodical approach to rebalancing. That way you avoid the risk of having fewer liquid fixed-income assets to draw from if the stock market decline gets worse and stock prices remain depressed.

Cut Your Budget During Stock Market Crash

Trimming spending is another way to trim the amount of cash you need to raise from your 401(k) and other investments, says LaVigne.

Another place to tap income for short-term needs is to borrow against your home via a home-equity loan or home equity line of credit (HELOC), says Harden. Home equity is the value of your home minus any mortgages you owe.

“A HELOC is a good option for people with a lot of equity in their homes,” said Harden. The average homeowner had $303,000 in home equity at the end of 2024.

Since no one knows if the stock market rout will get worse or how long it will last, investors who need capital in the next year should reduce stock exposure, says Richard Saperstein, chief investment officer at Treasury Partners.

“Investors with three- to five-year horizons should identify how much additional capital they would be comfortable adding to the equity markets and identify entry points,” said Saperstein.

For pre-retirees whose nest eggs have been gutted by the stock market turmoil, another option is to keep on working a little bit longer to avoid having to draw from accounts in down markets.

Stay Defensive

It’s prudent for retirees to have a more defensive portfolio, says Steven Conners, founder of Conners Wealth Management. If you’re not there already, Conners offers this advice: “Get to your point of comfort.”

To reduce the volatility in your portfolio, consider investing in dividend-paying stocks, adds Conners. “Bringing down the risk in your portfolio doesn’t mean that you have to get out of stocks completely,” said Conners. To reduce tariff-related risk, seek out domestic stocks less impacted by global trade, he adds. And there’s nothing wrong with hiding out in short-term T-bills like the 3-month Treasury which yields 4.2%, Conners says.

And if your portfolio asset allocation has put you too far out over your skis, now’s the time to review your asset allocation to avoid getting into a cash-crunch problem the next time stocks crater, adds Baird’s Bartick.

“Put yourself in a better position to withstand future market downturns,” said Bartick.

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