What do you do when the market takes a dive? People ask me sometimes, “Do you think the market’s going to go up or down?” And I always answer, “Yes, I know the market’s going to go up or down.” And when you’re saving money in the market and when you’re in retirement, what do you do when the market takes a big downturn? Today we’re going to talk to you about it and give you some remedies so that maybe you can put yourself in a position to do nothing when the market takes a big dive.

I’m standing in front of one of the boards that’s in every one of our conference rooms at Mosley Wealth Management. We advocate that when you build a plan for retirement, you have money in three basic buckets. If you have money in the bank, that’s money that’s accessible. That’s money that’s there for when life happens because life still happens in retirement. Most of the people have a good deal of money when they come to us, and it’s in the red over here, it’s money in the market. The reason we put money in the market at red is because it’s at risk. When the money in the market goes down a big amount and you’ve got a hundred percent of your money in the market, then you’re in trouble sometimes.

Twice since the year 2000, the market has gone down 50%, a little below at one time, a little above it the second time. But if you average it a little more than 50% in the two big downturns, 2000 to 2002 and around 2008. So what happens if you’re in retirement and yeah, you’ve got the money in the bank a little bit, but you’ve got the rest of your money in the market? Well, the biggest thing that most of the big box investor firms overlook is the column in the middle, the second column, the money that’s in the income principle protected. What do you have that’s protected? That’s where in retirement you should be drawing out your income. You see, if you’re over here in the bank money, it’s not making enough money. If you’re over here in investments, it could be too volatile for you, so we advocate that you put at least two to three years of the money that you’re going to be using for income in a principal protected bucket.

We do our best with every single person to build that plan for everyone who will realize that we build the plan ultimately the way you decide, but when we recommend something to somebody, we take into account ahead of time, market downturns. So when your income is coming out of an income principle protected bucket and the market’s down 30, 35, 40%, nobody wants to be down that far, but it does do that sometimes. The one thing we know about the market is it will and it does come back, what, given time. So I don’t know what it’s going to do in four hours. I don’t know what it’s going to do in four days or even four weeks or four months, but I know that if you’ll give me two or three or four years to let that money ride in the market, it’ll be back up. It’ll bounce back, generally. It always does in that period of time.

So if I’m drawing my money out of a principal protected bucket for my income, I can have the freedom to let this have its ups and downs, to play its roller coaster, to take the dive, and I’ve got my money in the principal protected bucket, and that’s where I’m drawing my income. Two ways to draw your income from that. Number one, you could put it into something really safe. You can put it into a money market account and say, “I know it’s going to be there. It’s not going to make very much, but I know over the next two or three years, my income is taken care of. It’s out of risk of the market downturn.” That’s how you’ll survive a dive.

The other way is to put that money in the principal protective bucket is to take the money that you’re going to need for income for the rest of your life and to put that into a fixed indexed annuity that’s going to pay you guaranteed, sometimes increasing income for as long as you live, and if you’re married for as long as your spouse lives, even after you run out of money. That’s what a fixed indexed annuity will do. It will allow you to never outlive your income.

Over here, this gets down to zero, if you’re in the market and the market crashes, the market goes down, you’re drawing out of it, you don’t have this protected bucket in your portfolio. Over here, you get down to zero, you’re out of money, you’re out of luck, you’re on your own, you’re on social security. Over here, if you use the fixed indexed annuity, you will never, ever run out of income for the rest of your life because that insurance company will insure you against living too long. So what do you do when the market takes a big dive? If you’ve got the right kind of plan, you’ve already got a plan with that fail-safe built in to the plan.

So what we’re talking about today, the basic elements of building a retirement blueprint, a real retirement plan. If you’ve got a real retirement blueprint, it’s going to address your income to make sure you’ve got continual guaranteed increasing income for the rest of your life. It will adjust for inflation. It will give you more money as you live longer. It will also address your investments so you don’t have to worry about the dives in the market because they’re going to come. They’re going to come about every four or five years for sure, there’s going to be a recession, at least historically. That’s what if you averaged all the recessions over the past 125 years, they come about every four or five years, so you don’t want to panic every four or five years. You want to plan one time so that you can manage all of those.

So income, inflation, investments, it will address your taxes. How much are taxes going to cut out? Because no matter what happens in the market, the tax man cometh. How are you going to pay that bill? Healthcare, what happens if you’re having to draw out a lot of money during a market downturn and you have to take care of healthcare? And then when you’re no longer here, it addresses your legacy and how you leave that. We call that a retirement blueprint. If you want to know more about it, check out our “How to Build a Retirement Plan” video and you’ll see a whole show where we’ve just talked about what it means to have a retirement blueprint.

If you want to find out personally how we work with our clients, then check out our website at www.mosleywealthmanagement.com. Get on our schedule. Let’s put up an appointment together so we can talk to you. If you liked this podcast today, here’s what I want you to do, like it. Click the like button. Subscribe to it so that you’ll know when we have future podcasts, and pass it along to a friend who might be panicking right now because the market might be down or panicking sometime in the future. Hey, I promise you, if you’ll give me eight to 10 minutes every single week, sometimes shorter, I will do my best to increase your financial knowledge.