Can a market crash benefit retirees?

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A market crash can benefit retirees under specific conditions related to the timing and recovery of the market. Michael Kitces explains that if retirees experience a market crash early in retirement but the market recovers quickly (within a year or two), the long-term impact on their retirement funds can be minimal. This scenario contrasts with prolonged periods of mediocre returns or slow recovery, which pose a greater risk 1.

Brad Barrett highlights that for savers who are still accumulating assets (not yet retirees), a market crash presents an opportunity to buy investments at a lower price, effectively ‘on sale’. This can significantly benefit their long-term financial growth as they purchase more shares at lower prices 2.

Thus, the benefit of a market crash to retirees depends significantly on their investment strategy, the timing of the crash relative to their retirement, and the speed of market recovery.

Retirement Market Crashes

Michael explains that the speed of market recovery is more important than the crash itself when it comes to retirement planning. A few years of sharp decline followed by a quick recovery is less detrimental than a decade of mediocre returns.

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176 | Flexible Spending Rules For Early Retirees
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