Where is the safest place to pull money in a down market?

Key Takeaways

  • It can take a long time for your portfolio to recover if you don’t have your assets correctly allocated.
  • When there’s a down market cycle, look at areas of the market that are doing better than others and pull your money from those areas to ensure a faster recovery.
  • A safe withdrawal rate from your portfolio is 4% a year.

Jim Ryun was going for the gold in the metric mile at the 1972 Munich Olympics. In his semifinal race, he got tripped up and fell with about two laps to go. He got up and ran valiantly, but he could not catch the leaders and didn’t make the final. He just didn’t have enough time to make up the difference and ultimately didn’t get a shot at the gold.

Likewise, if you are a pre-retiree or retiree and you’re taking money out of your portfolio at a safe withdrawal rate of around 4%, and it has a problem, meaning it goes down a lot when you’re pulling the money out, it could take a very long time for you to catch up.

Case in point: in October of 2007, the stock market topped out and went down all the way through March of 2009, a decline of over 50%. Let’s say your portfolio was $100,000 at the height, and you were taking out $20,000 a year. It goes down 50%, so you’re at $50,000. You withdraw the $20,000, so now you’re at $30,000. You have to make 233% on that $30,000 to get back to $100,000. It could take many years to recover back to the original $100,000!

The bond market went up 5% during that same time, so if you had taken money from the bond side of your portfolio, that means $100,000 would have turned in to $105,000, you withdraw your $20,000 and you would have had $85,000 left. Guess what? You only have to make up 17% in that scenario. That’s a huge difference.

What’s going on here?

 It’s all about the how, where, and why.

How? Before you go in to a down market cycle, make sure you have your entire portfolio set up properly, allocated correctly for any kind of down market so you can selectively withdraw money when you need it.

Where? You pull the money specifically from areas of the market that are up during a down market, or from areas that haven’t gone down that much.

Why? So your portfolio can recover during the next up market cycle, and it won’t have to recover as much.

Uncertain about your portfolio allocation?

Discover a better way to manage your finances. Learn more about TransformingWealth™ , our proprietary approach, designed to get your arms around the big picture so you can make informed financial decisions. We help our clients makes sure their portfolio asset allocation is set up correctly, they are distributing money that will work out in the short and long term, with a safe withdrawal rate. Learn more about Coyle’s TransformingWealth Preview Meeting, and schedule a complimentary consultation and start living the Good Life Managed Well™.

Until next time, enjoy!


Gary Klaben is in our Glenview, IL office and serves our clients who are now located all over the country.  He has over 30 years of experience and is the author of Changing the Conversation, The Wealth Sanctuary and co-author of The Business BattlefieldWhether advising his clients, mentoring his team, or coaching entrepreneurs, he is always simplifying complexity and motivating others to take the next action that’s right for them.
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