Your Questions, Answered: Selling Stock Before Retirement

December 3, 2020

On this week’s episode of Your Questions, Answered Jon Bresnen and Brian Leitner discuss considerations for selling stock, and answer the following question:

“Is selling stock to be more conservative going into retirement a good idea?”

Do you have questions you’d like answered? Email them to [email protected], and we’ll provide answers.


Brian Leitner: You have questions. We have answers. Back with another quick clip. We had a question that came in today and this individual is planning on retiring in the next year or so. They’re considering selling a good portion of their stocks to be more conservative as they move into retirement. What are some of your thoughts around strategies such as that? 

Jon Bresnen: All right. I think the best way to answer this question is through an analogy and story, so bear with me. Here we go. Brian, as you know, I live in Cincinnati and my family takes a lot of road trips to visit family across the state. And, like you, we rarely go anywhere without a plan first. Are we going to stop for food along the way or are we going to bring food?  Are there gas stations? Are there bathrooms for the kids, etc.? 

The most important question we ask is, “When are we going to get there?” A couple of times a year, we take a road trip from Cincinnati to Toledo. And, as you know, traveling on highways, the road trip is rarely the same. There are different departing times, there’s traffic flows, there’s weather, all these different factors that can impact things. But we’ve done it enough that we have a pretty good idea about how long the trip will take. 

Brian: So generally, how long does that trip take? 

Jon: About five hours. I have, three kids so if you live in the state of Ohio, I think you’ll understand that.  

Brian: So, what’s your best time and what’s your worst time?  

Jon: Okay. I’ll give you the extremes, best case scenario is under three hours. Worst case scenario was a Thanksgiving with snow and traffic and it took about nine hours to get there. 

Brian: Wow. So, John, I appreciate the analogy, but what does this have to do with the stock market? 

Jon: All right. So, here we go here. One of the biggest risks for retirees is selling their stocks at a loss to meet their income needs. This can happen during recessions. Usually, it only takes the stock market about two-and-a-half years to break even, or recover from losses when we go through a bear market. And a bear market is when stocks are off at least 20% from their highs.  

So, to recap, it takes about two-and-a-half years for stocks get back to even. Sometimes it’s only taken a few months. And, there’s been an instance where it’s taken more than a year or more than a decade for stocks get back to their high. So, retirees need cash and bonds to help avoid selling stocks during tough times. Cash and bonds usually hold their value much better. Similar to our Cincinnati to Toledo road trip, each investor must ask themselves, should I plan for the average, or the best case, or the worst-case scenario in terms of planning? 

Are you the type of person who wants to just assume the average amount of time for stocks to recover is two-and-a-half years? Perhaps you’re on the conservative side and you want to err with more caution and assume it takes stocks double the amount of time to recover, say five years. You could be on the other extreme, with an aggressive investor, and maybe you only want to plan for stocks to take about a year to recover. 

So, through these personalized conversations and customized portfolios, we help investors plan in advance for their own road trip with their own unique perspective. 

Brian: Jon, those are great points. I know that a lot of folks feel this way. Once I retire, I’m going to have a very conservative portfolio. I’m going to significantly reduce my equity exposure, but the reality is they’re going to need some of that growth depending upon when they retire. Retirement can last 30, some odd years. So, to beat inflation, to accomplish what’s most important to them, again, it’s always critical to have that diversification inside the plan, but especially when you highlight it. Everybody’s situation is different based on your risk tolerance, your goals and all that goes along with that. So, it’s a common question we get, and I really appreciate you being here to answer it. 

Jon: You’re very welcome. 

Brian: And if you, or anyone else, has questions they’d like answers to, they can feel free to email us at [email protected]. Thanks for watching. 

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