For many of us, the happy prospect of retirement is clouded by the terrible thought of poverty and struggling to get by. Even if you’ve been carefully saving for that day, it’s easy to see your plans shredded by the economy, so many people dread the possibility of retiring in a bear market.

But in reality, a bear market is the best time to retire.

Why Retirees Fear the Bear

Nearly a decade ago, when the markets were recovering from the 2007-9 bear run, an Allianz Life survey showed that 61% of boomers feared outliving their money in retirement more than they feared death.

It’s an extraordinary statistic, given the finality of death, but an entirely understandable one.

After all, finances are an immediate worry that we are told we should do something about, but that circumstances can wreck for us.

We can imagine becoming poor enough for it to ruin our lifestyles. Death, on the other hand, is too final to properly comprehend.

Because of this fear, it’s common not to want to retire in a bear market. Your retirement is reliant on the value of your investments and you’ll be retiring at their lowest ebb. You’ll be heading straight into that poverty you dread.

Given that a bear market hits on average every five years, and that this century began with the two crushing bear markets of 2000-2003 and 2007-2009, it’s a possibility everybody has to consider.

Entering a bear market early in retirement can be particularly damaging, hitting finances more than a bear market later on. That early loss in wealth will make it harder to come back later and so have enough money over the following decades to live your planned retirement.

Especially if you’re withdrawing money to live on, lost balance means you need an even greater upswing to recover.

But there’s a big difference between retiring during a bear market and having one hit you early on.

Bear Versus Bull for Retirees

If you retire at the top of bull market, you’re heading into old age with your finances at their peak.

That sounds great, but in reality it’s a trap, because from here, things are only going to get worse.

Assume that you only retire at a point when you think you’ve got enough wealth to see you through. Then think about what that means in different markets.

If you retire in a bull market, then at some point in the next few years the good times are going to end. Your investments will fall in value. What you had was enough to see you through, and now it isn’t – a pattern that’s going to repeat over the following years.

That’s why the early shift from bull to bear can be so devastating. The only way to make back what’s lost is to significantly cut back on expenses, impinging on your expected lifestyle, or to go back to work.

This is particularly devastating because it runs against expectations.

When things are going well, we expect that to continue, in a way that’s often completely unrealistic. The shock of changing circumstances makes the practicalities harder to deal with.

On the other hand, if you retire at the bottom of a bear market with enough money to see you through, then things are going to get better from here on out.

Instead of losing value and so sinking your financial plan, your investments will rise in value as the market recovers. Investments made during the bear will be at lower prices, giving you some bargains as you head into retirement.

A bear market will thoroughly test your finances, and if they’re still good enough to retire on then you know they’re going to last (unlike if you retire during a bull market).

Changing Mindset

In part, this is about changing your mindset.

A happy retirement isn’t about having the most money, it’s about having enough money to see you through.

The freedom of retirement will bring you happiness that balances your lower income. Otherwise our current retirement system would have collapsed beneath the weight of angry pensioners.

Retiring in a bear market means you know you’ve got enough money to see you through the low points in the market.

It provides certainty and security.

It sets your expectations for how you can live at a sustainable level, only for that lifestyle improve as your retirement goes by and markets recover.

Paradoxically, a bad market is a good start to retirement.

Don’t fear the bear.