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Protecting your income—consider what’s really important
Most people have homeowner’s insurance, life insurance, and auto insurance to protect what’s important. Doesn’t it also make sense to protect your retirement income from market loss? Look at the chance you will encounter at least one bear market in retirement, compared with other risks you are already insuring. (Bear markets typically represent a loss of more than 20%.)
0.3%
Chance of a re in a home in a year1
0.68% to 1.15%
Chance of death by age 60 for women and men3
2.86%
Chance of a car accident in one year2
up to 100%
Chance of a bear market in a 30- year retirement if market history repeats itself (there were 13 bear markets in the past 75+ years)4
Did you know that longer life spans mean the average retiree will likely live through several bear markets? Bear markets typically last 13 months with an average loss of 30.4% and take 22 more months to recover.5
1 https://www.nfpa.org//-/media/Files/News-and-Research/Fire-statistics-and-reports/US-Fire-Problem/osFireLoss.pdf and https://www.census.gov/quickfacts/fact/table/US/PST045219. Data based on 2018 statistics.
2 https://crashstats.nhtsa.dot.gov/Api/Public/ViewPublication/812794 and https://www.ssa.gov/oact/STATS/table4c6.html. Data based on 2017 statistics.
3 https://www.census.gov/quickfacts/fact/table/US/PST045219.
4 According to Goldman Sachs data, reprinted with their permission, there have been 13 bear markets since (and including) World War II. The average time between bear markets was 4.9 years, with 9.4 years being the longest time period between bear markets.
Copyright © 2020 Goldman Sachs & Co. LLC. All rights reserved.
Thus, anyone retiring during this 30-year period would have had a 100% chance of encountering a bear market, and most likely more than one, during their retirement. Although this information can’t predict a future bear market, it supports the likelihood of a bear market during a 30-year retirement based on market history.
5 “With Volatility Here to Stay, Advisors Can Help Lock in Income and Protection for Investors,” Melissa Kivett, IRI Insight, Issue 3 Vol 10, Fall 2019 (stats from CNBC, “The stock market loses 13% in a correction on average, if it doesn’t turn into a bear market,” October 2018, https:// www.cnbc.com/2018/10/26/the-stock-market-loses-13percent-in-a-correction-on-average.html and Marketwatch.com, “The difference between a correction and a bear market—and 5 other nancial terms to know for 2019,” January 2019, https://www.marketwatch.com/ story/the-difference-between-a-correction-and-a-bear-market-and-5-other- nancial-terms-to-know-for-2019-2019-01-01).
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