Why a drop feels different at 67
When you were 40, a market decline was almost good news: your paycheck kept coming, and you were buying stocks on sale. At 67, the math flips. You are no longer adding money, you are taking it out. Every dollar you withdraw while prices are down is a dollar that can never recover, because you sold it at the bottom. Financial planners call this sequence-of-returns risk, and it is the single biggest reason a market drop early in retirement is more dangerous than the same drop later.
Sequence-of-returns risk, in plain English
Imagine two retirees with identical savings and identical average returns over 30 years. The only difference is the order in which those returns arrive. The one who hits a bad stretch in the first few years, while withdrawing, can run out of money decades earlier than the one who gets the same bad stretch near the end. Same average return, very different outcome. That is why what you do in the first years of a downturn matters so much, and why selling to 'stop the bleeding' can do lasting damage.
What 150 years of history actually shows
It helps to zoom out. Morningstar's review of roughly 150 years of market data identified 19 bear markets, defined as declines of 20% or more, which works out to about one per decade. The crucial point: every one of them eventually recovered and went on to new highs. The catch is that recovery times vary enormously. After the 1929 crash, which fell about 79%, the market took roughly four and a half years to bottom and far longer to fully heal, while the COVID drop of early 2020 fell about 20% and recovered in just four months (Morningstar).
Recoveries can be fast or painfully slow
That range, from four months to more than a decade, is the honest answer to 'how long until it comes back.' Morningstar notes the early-2000s 'Lost Decade' ultimately involved a stock-market loss of about 54%, and the market did not durably reclaim its prior peak until 2013, more than twelve years after the initial crash. This is exactly why retirees should not have money they need in the next few years sitting entirely in stocks. The stock portion of your portfolio is for years you can afford to wait out, not for next month's grocery bill.
The mistake that costs the most
The biggest danger is not the drop itself, it is what investors do in response. J.P. Morgan Asset Management's widely cited 'Guide to the Markets' analysis found that for the 20 years ending in 2024, an investor who stayed fully invested in the S&P 500 earned about 10.5% per year, but missing just the 10 best days cut that to 6.2%, and missing the 20 best days cut it to 3.6%. The reason this is so dangerous: seven of those 10 best days occurred within two weeks of the market's 10 worst days. If you sell in a panic, you are almost guaranteed to miss the rebound (J.P. Morgan Asset Management).
Build a cash cushion before you need it
The cleanest defense against sequence risk is keeping one to three years of spending in cash and short-term safe assets, so you can pause selling stocks during a downturn and let them recover. With Treasury bills, CDs, and money-market accounts paying in the low-to-mid 4% range in mid-2026, that cushion is no longer a drag on your returns the way it was a decade ago. When stocks fall, you spend from the cushion; when they recover, you refill it. This is sometimes called a 'bucket' approach.
Be flexible about how much you withdraw
You do not have to withdraw the same dollar amount every year. Trimming spending modestly during a down market, even skipping an inflation raise for a year, dramatically reduces the odds of running short over a long retirement. Small, temporary adjustments early in a downturn are far less painful than a permanent cut forced on you later. To see how the order of returns and your withdrawal rate interact, try our <a href="/calculators/withdrawal-sequencing">withdrawal sequencing calculator</a>, which lets you test how a bad early stretch affects how long your money lasts.
What 'do nothing' really means
Staying the course is not the same as ignoring your plan. It means rebalancing back to your target mix, drawing from cash and bonds while stocks are down, and resisting the urge to make a big, emotional move based on a scary headline. The investors who fared worst historically were not the ones who held through a crash; they were the ones who sold near the bottom and bought back near the top. A written plan made in calm times is your best protection against decisions made in fearful ones.
A reality check, not a guarantee
History strongly favors patience, but it is not a promise. No one can tell you exactly when this particular market will recover, and a portfolio that is too aggressive for your needs is a real problem worth fixing, ideally during calm periods rather than in a panic. The goal is a plan you can actually stick to when the headlines are ugly, because the plan you abandon is worse than the one you never had.
This article is educational and not personalized financial advice. All investing carries risk and past performance does not guarantee future results. Consider consulting a fiduciary financial advisor about your situation.