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  • Retirement isn’t the ideal time to face a recession. But for retirees today, it’s a reality.
  • Business Insider followed up with four retirees from the 2019 “Real Retirement” series to find out if and how the stock market drop caused by the coronavirus pandemic is affecting their money.
  • While all said that their finances were largely not impacted, they say that living affordably, investing conservatively, and choosing to leave their investments alone help them weather the storm. 
  • Read more personal finance coverage »

The stock market has crashed, half of working-age Americans won’t get a paycheck next month, interest rates are near 0%, and the economy is still largely shuttered.

It’s a concerning time for many Americans, and is especially tense for anyone watching the money they plan to live on in retirement tumble in the market. In times like these, Mike Cocco, a financial planner with Equitable Advisors, tells Business Insider that having a plan is crucial. “Any plan is a good plan as long as you stick to it,” he says. 

Business Insider followed up with four retirees — Edd and Cynthia Staton, James R., and Bill Davidson — who took part in our “Real Retirement” series last year profiling regular people’s retirements to find out if and how the economic impacts of the coronavirus has affected their retirement plans.

For all four retirees, changing to more conservative investment strategies, not touching investments, and finding ways to live affordably have made weathering this potentially devastating storm a little bit easier. 

Investors approaching retirement can’t afford much risk

Most experts recommend people approaching retirement shift to a more conservative investing portfolio, especially after turning 50. This means changing your portfolio allocations in three primary places: stocks, bonds, and cash. 

“To keep up with purchasing power, you need an allocation in equities,” says Cocco. “You also need allocation in bonds or fixed income as a way to generate interest with stability. But, you also need a cash bucket.”

A sudden market drop like the one that happened in March highlights the importance of being a more conservative investor and keeping cash instead of more volatile investments when you don’t have the time to ride out market fluctuations. “The stock market took a big hit, and the bond market took a big hit, too. The only place that you could really hide out for that period was in cash,” Cocco says.

James R., 64, a semi-retired college professor who asked that his last name not be used to protect his privacy, told Business Insider in an email that this strategy helped him feel less affected by the drop. “”My [taxable investment account and 401(k)s] were shifted to a conservative position a year ago so the value has not gone down too much,” he wrote. 

Retirees Edd and Cynthia Staton, who retired to Ecuador in 2010 after the 2008 financial crash, say that they took a similar approach, keeping more savings in cash. They opened CDs, fixed-rate savings products that offer interest in exchange for money being held for a set number of months or years. Currently, CD rates in Ecuador are much higher than they are in the US — the rate for their CD in Ecuador is around 9%, while the typical US CD earns .32% — but the same concept applies: They’ve moved money out of the market to avoid risk.

Doing nothing is the best way to weather the storm

Now is not the time to panic, sell off investments, or get out of the market — doing so could lead to big losses. The best thing to do right now is nothing, Cocco and other financial planners agree.

Retiree Bill Davidson says he learned this with investment decisions he made in 2008. “Don’t panic,” he told Business Insider in an email. “I’ve done that before and it doesn’t end well.”

Now is not the time to touch your investments, even if you see your account values dipping. For retirees living on the money they have saved, Cocco says that this is the time to rely on the part of your retirement savings that isn’t invested. “Instead of taking money out of any of your investment accounts, let’s use the cash you have saved,” he says. “That’s what it’s there for, to buy us time to get back on track.”

Davidson, who retired six years ago at age 54, isn’t touching his investments this time. Since his retirement plans haven’t changed, he’s staying the course, following a dollar-cost averaging plan that buys low-cost funds twice a month and keeping a majority of his savings in cash.

For anyone who’s done their financial planning ahead of time, staying with your current strategy is the best way to get through this situation, Cocco says. “We’ve worked on a plan and we put in so much time up front. We prepared for situations like this crisis. Because we do have the plan, it’s time to relax.”

Retirees agree that living affordably is critical

For retirees, Cocco says there needs to be some cushion between expenses and income, and he advises anyone retiring soon start to estimate their expenses. “If they’re not easily met, then there’s no margin of safety. Then, we’ve got to sharpen the pencils and see what else we can do to cut costs.”

All four of the retirees Business Insider checked in with have done this in some way, from sticking to a budget or moving to find lower costs of living. 

Davidson’s strategy involves living in an efficient, affordable home in New Mexico. “We live within our modest budget and don’t tap into our investments for our monthly expenses,” Davidson says. In some ways, the coronavirus stay-at-home orders is making this easier. He continues, “We’re driving less and not traveling at all.”

For James, keeping expenses low has always been a part of his retirement strategy. He previously told Business Insider that he’s chosen to live a frugal, minimalist lifestyle, and has avoided debt to make retiring easier and more affordable.

The Statons also feel their affordable lifestyle choices have set them up for success. After moving from Las Vegas, Nevada to Cuenca, Ecuador, they found lower costs of living. “We’re comfortable living on our benefits here,” Cynthia told Business Insider. Since they’re living much more affordably, they aren’t concerned that the 2020 stock market drop will affect them as dramatically as the one in 2008. 

Keeping costs low is critical for these four retirees. While the stock market drop isn’t hugely affecting them, having low living costs can help them stay afloat, whatever the future brings.

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