Cashing Out Before A Market Crash? Protect Your Portfolio With Three Possible Options

"My father retired in 2000 and lost 50% of his NAV.  Then hardly recovered only to experience the 2008/9 crash. It was awful for him. " For me, this was one of the more difficult comments to read from the video that we posted last week on whether your nest egg could survive a 50% S&P drop in retirement. And judging from the replies, it seems that this comment also hit a nerve with a few of you in our community. So with that in mind, let's look at the last 70+ years of stock market history and see:

1. How often do bear markets occur, and how long do they last? Plus, who might want to just stay invested in equity markets right now?

2. What are the three fundamental ways to protect your investments if you’re closer to retirement or already in retirement?

3. How attractive might your guaranteed lifetime income options be if you were to lock-in at current levels? 

Transcript

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My father retired in 2000 and lost 50% of his net asset value. Then hardly recovered only to experience the 2008-2009 crash. It was awful for him. Hello, Diamond Nesteg members, Super Savers and Course fans. I hope you're healthy and well. So for me, this was one of the more difficult comments to read from the video that we posted last week on whether your Nesteg could survive a 50% SP drop in retirement. And judging from the replies, it seems that this comment also hit a nerve with a few of you in our community. So the SP 500 has gotten a bit more wobbly this week with all that has been happening in the world. Nonetheless, equity markets are still trading near all-time highs. And based on the feedback that we're receiving, it appears that the vulnerability to correction or even bear market remains a very real top of mind concern at the moment for many of our Diamond Nest regulars. So, with that in mind, let's take a look at the last 70 plus years of stock market history to see what we might be able to learn from it and discuss the options you have for your portfolio depending on where you might be on your financial and retirement journey. Here are the three topics that we'll be covering today. One, how often do bear markets occur? And how long do they last? Plus, who might want to just stay invested in equity markets right now? And for those of you who are more optimistic about the current market environment, like this commentator here who wrote, The SP will never crash, haven't seen anything that hasn't come back yet. We'll have something as well in this section of today's discussion for you. Two, what are the three fundamental ways to protect your investments if you're closer to retirement or already in retirement? And three, how attractive might your guaranteed lifetime income options be if you were to lock in at current levels? Let's dive in now, folks. How often do bear markets occur? And how long do they last? Plus, who might want to just stay invested in equity markets right now? Let's go through the complete list of bear markets that the SP has experienced over the past 70 years. We've had 12 bear markets between 1956 and 2025, where the SP 500 declined at least 20% from peak to trough as measured by daily closing prices. There were some near misses as well over these 70 years. For example, just last year in 2025, the SP 500 fell from 6,144 on February 19th to a low of just 4,983 on April 8th, after President Trump announced his Liberation Day tariffs. This decline was clearly not insignificant, but still only 19% from peak to trough. So this stretch of falling prices, like similar ones, doesn't quite make the cut for today's analysis. So this column shows when the bear market started, the month and year when the SP reached its highest value before the decline started. This column shows the percentage decline from peak to trough, from the highest point to the lowest point when prices bottomed out. And this column shows the number of months it took to get from peak to trough. How long the fall lasted before it bottomed out. This column shows the number of months it took from trough to full recovery, from the lowest point back to the previous peak value from before prices started collapsing. And this column shows how long the bear market lasted overall before it fully recovered. The number of months it took to get from the previous peak via the trough to reach the previous peak value again. This is essentially the sum of these two previous columns. This column shows whether the bear market was accompanied by a recession. And this row shows the averages for these 12 bear markets. So the average bear market saw a decline of 33% and lasted about 13 months from peak to trough. But it took on average almost exactly 36 months, three years before the SP 500 reached its previous high again. After some of the more dramatic bear markets, though, it took the SP 500 a much longer time before it reached its previous high again. Let's take a look at the year 2000 Internet Bubble Bear Market and Recession. Because as I mentioned earlier, this was an episode that reminds some of our Diamond Neste regulars, as well as market observers in general, of our current AI euphoria. As those of us who live through it remember, the run-up to the peak in 2000 was driven by the very real opportunities of the then new internet. But in retrospect, the market went up too high too fast and then came crashing down by 48%. Some of the younger investors out there have never lived through a bear market, but it took the SP 87 months, more than seven years, for a full recovery back to the previous peak. And that isn't even the full story. After the SP 500 had just recovered from the internet bubble in mid-2007, the next bear market followed almost immediately. Those of us who invested in the SP 500 during that period may recall it was not a good period overall for most of us. In fact, as some of our regulars already know, Morningstar labeled this period the lost decade, which even subtly understates the 13 years that it lasted. And some of the retirees and soon to be retirees during that time had to postpone retirement andor get by on significantly less than they had planned for. Some folks even saw most of their retirement savings wiped out due to heavily overconcentrated investments in the tech sector, like this Super Saver's father from the beginning of this video did. In the big picture, a new bear market started on average almost every six years over the past 70 years, every five years and nine months to be precise at the time of this taping. And we'll almost certainly see another market downturn at some point in the future. Of course, as we often say in the industry, past performance is no guarantee of future results or outcomes. And overall, the SP 500 has built a strong track record as one of the main wealth-building tools for many American individuals and families over the long run. In fact, as of the time of this taping, the SP 500 has grown by an annualized 7.6% since January 3rd, 1956. And this is just the index value. If you reinvested all dividends along the way, the annualized growth rate would even be closer to 10% despite all these bear markets along the way. So it may still make sense to invest in the SP 500 for long-term growth and wealth building, so long as you have the risk appetite and time horizon to wait out any volatility that will accompany it. For instance, if you're in your 20s and 30s, or even if you're a bit older and still have a long runway to retirement like Marcus and I do. But what if you're already in retirement or planning to retire in the next 7 to 10 years and concerned that the current tech and AI-driven SP 500 levels are unsustainable? What can you do with your equities? And this brings us nicely to the next part of today's discussion. What are the three fundamental ways to protect your investments if you're closer to retirement or already in retirement? So, as we often say, the future may look completely different from the past, and everyone's financial journey is different. But one iron rule has always been true historically. Once you're in the middle of a bear market, there's just not that much that you can do. The best moment to protect yourself is before the downturn starts. So, with the benefit of hindsight, let's quickly recap the hypothetical scenario that we played out in last week's video, which I've linked below for you in case you want a refresher. And let's say that it's the beginning of 2000, just before the internet bubble was about to burst and the lost decade was about to begin. And you're about to retire or already in retirement. The blue line on this chart is the SP 500 and the red line is the Fed funds rate. From the blue line, you can see that both the internet bubble bursting and then the great financial crisis crushed equity portfolios twice before the markets finally recovered fully in 2013, as we mentioned earlier. And from the red line, you can see what happened to interest rates. In response to both market crashes, the Fed lowered rates dramatically, twice as well. First in a more limited way after the internet bubble, but then much more dramatically after the great financial crisis, when rates basically went to zero and stayed there through 2014. Rates only started slowly going up again at the end of 2015. So clearly, neither of these effects were great for retirees. Both their equity portfolios and the interest they could earn on new investments were crushed at the same time. And as I just mentioned, once this had happened, there was not really much anyone could do about it except to suffer through and wait, or rather hope, for better times. With the benefit of hindsight, the only way to get through this 13-year-long loss decade unharmed would have been to protect yourself before everything started going south. For example, the yellow line here shows that hypothetically speaking, retirees in the past might have felt quite smug about protecting their portfolio and locking in their retirement income in early 2000. Yes, our retirees would have missed out on the last leg of the internet boom and then again on the short recovery in 2007 under this hypothetical scenario. But overall, having locked in some or perhaps an even meaningful amount of their nested here means that they would presumably have been able to sleep well through these difficult retirement years that kept many others up at night. Of course, it could all play out completely differently this time around than during the lost decade. Plus, no one can time the market. It's impossible to predict when the markets will either go up or down with any accuracy. That said, if you fear a coming bear market or even outright crash that may or may not be similar to the lost decade and don't have the time to potentially wait out a prolonged bear market, there are three fundamental options if you want to protect yourself and your portfolio. For example, to lock in your retirement savings like this yellow line here, and especially while rates are currently on average at two decade level highs. Here in this column, we'll have a description of the three fundamental options. And in the next columns, we'll show you if the option provides 100% principal protection, guaranteed income for life, as well as whether it allows you to participate in the potential future upside of the market, in the SP 500, for example, up to a certain cap. Option one includes investments that offer principal protection but no guaranteed income for life, such as treasuries, CDs, and multi-year guaranteed annuities, or mygas. These instruments may even pay a decent yield at the time of this taping on July 17, 2026. For example, treasuries are yielding between around 3.7% to slightly above 5%, depending on the maturity. But of course, you won't participate in any future growth in the equity markets. In addition, while you can build a safe and guaranteed income by laddering treasuries, CDs and mygas, a ladder is not strictly speaking locked in for life, but limited to a 30-year time horizon, the maturity of the longest treasury, although that may be sufficient for many practical purposes. CDs and mygas will have much shorter maturities than that though. So, within option one, which offers 100% principal protection, but no guaranteed income for life, you could also consider standard fixed indexed annuities or fias, meaning fias without income riders. In addition to the principal protection, standard fias allow you to keep a part of the upside of an index, for example, up to 8.75% for one year at the time of this taping on the SP 500. FIAS as well as MIGAs will generally not pay you any regular income or dividends though, and they're not very liquid. Many fias may allow you an annual 10% fee-free withdrawal, but if you need to pull out more than that before the surrender period, you will usually have to pay some hefty early withdrawal penalties. That said, one of the charms of an annuity is that it can be customized to your individual circumstances, goals, and expectations. So if at any point in this video you're interested in what the best annuity options might be for you and what your specific numbers might look like, email us at jenniferdimonestic.com so that we can connect you with our trusted annuity specialist who can help you sort through all the options and find some clarity amongst the confusion. Now, in last week's video, we also mentioned structured protection ETFs as a possible alternative to standard fixed index annuities without an income rider if liquidity is a concern. Structured protection ETFs also basically guarantee your capital. I'll come back to the basically part shortly, and they let you participate in the upside of an index to a certain extent. But you can freely buy or sell them on any day that the market is open. This liquidity usually comes at a price though. As we often say on this channel, there are generally trade-offs you will need to make when investing, depending on what is most important to you. And with structure protection ETFs, you need to be willing to accept a lower cap rate on the market upside than you would typically get with a fiat in exchange for the liquidity that these ETFs provide. In other words, the price you pay for the liquidity that structure protection ETFs offer is that you will typically keep less of the potential upside of the index. In addition, structure protection ETFs, unlike all the other options that we'll be going through on this table today, do not offer 100% principal protection, strictly speaking, as the expense ratio can be deducted from your initial investment if the market doesn't grow enough in a year. And if we take the example of Calamos Investments Structure Protection ETF, CPSJ, which was reset on July 1st of this year, CPSJ has an expense ratio of 69 basis points, which can add up over time depending on your investment amount and time horizon. And while we're on the topic, keep in mind that the downside protection of most fias as well as structure protection ETFs only works as intended when they mature. The industry calls this point-to-point protection. You could almost compare this mechanism to normal bonds, which will also only return their full face value at maturity, assuming your standard no default scenario. So, in a nutshell, option one is for our diamond nest egg regulars who want 100% principal protection and are not too concerned about guaranteed income for life. If this is you and you do not care about participating in the potential future growth of the market, treasuries, CDs, and mygas may be something to consider. If you do care about keeping a part of the potential future upside of an index like the SP 500, then standard fixed index annuities without an income rider may be the better option to look into. Remember that treasuries are guaranteed by the full faith and credit of our government. CDs are FDIC insured up to the standard limit of $250,000 per depositor per FDIC Insured Bank per account ownership category. And annuities are protected by your State Guarantee Association up to a certain threshold. The most common coverage amount is $250,000, but do check with your State Guarantee Association or trusted annuity advisor as this limit does vary from state to state. Moving on now to option two. If you're most focused on making sure you have the cash you need in retirement by locking in a guaranteed income for life. Single premium immediate annuities or SPIAS may be most suitable if you're about to retire in the next year or already retired. SPIAs don't really have a principal value once they start paying out, but they protect you against any potential market downturn by guaranteeing you an income for life that starts almost immediately. Say as soon as next month to cover your everyday essential living expenses in retirement. And usually no later than one year after contract signing, a SPIA essentially converts a usually large one-time payment to an insurance company into a guaranteed monthly or annual check that will last a lifetime, regardless of how long you live and regardless of whether markets go up, down, or even fully crash. So, for example, if your 72-year-old male in California investing a $100,000 lump sum into a SPIA at the time of this taping on July 17th, 2026, with one of the highest-rated A double plus companies, you might be able to get an annual check of a bit more than $7,350 per year as soon as next month. For a 72-year-old female, that annual paycheck might be just about $7,050. Please keep in mind that the examples from this video are illustrative only, and as of July 17th, 2026, your personal rates and conditions will depend on a variety of factors, including your state of residence, age, gender, and how highly rated your insurance carrier is or not. Your personal rates and conditions are not locked in until you sign your annuity contract. And if you want to see what the rates and conditions might look like for you whenever you might be watching this video, email us at jenniferdimonestic.com so that we can connect you with a trusted annuity specialist who can help you find the best annuity solution that's out there for you. So back to SPIAS. SPIAS do not generally allow for any potential future growth in an index, which brings us to option three. And the only option on this table that checks all three of these boxes here. Fixed indexed annuities or fias with an income rider. These may be most suitable if you have a few years before you need the income and want to give your NASDAQ an ultimate push. A FIA protects your principal 100% against downturns, while letting you keep some potential upside in the market that accrues to the surrender value. It also allows you to lock in at current rates a minimum guaranteed income for life that starts sometime in the future, but not necessarily immediately like with a SPIA here. And you have full control over when or even if you turn this income stream on. In addition, a FIA with an income rider lets your income base potentially grow over time the longer you delay taking the income. In a nutshell, a FIA with an income rider can combine safety and certainty with a large degree of flexibility. So these are the three fundamental options if you're getting nervous about a potential market bubble at the current time and want to protect yourself and your loved ones against the possibility of a sharp downturn andor long-lasting bear market that may or may not be similar to the lost decade. If you want to protect your savings and lock in your retirement income, like this yellow line here, so to speak. Now, we've been talking a lot about fias with income riders recently because the rates are simply very attractive at the moment, as I've mentioned earlier. Remember, annuity rates track interest rates. And as we've said before on this channel and in our VIP investment club, we feel that this may be a golden moment for fias with an income rider, while both markets and rates. Are at attractive levels. And it seems quite a few of our Diamond Nestec members and Super Savers feel the same way because we've received a lot of inquiries from the community about fias with an income rider, which brings us nicely to the next part of today's discussion. How attractive might your guaranteed lifetime income options be if you were to lock in at current levels? From what we've seen, those of you who are most interested in fias with income riders tend to fall into three key groups. One, you're about a decade away from retirement and want to take the guaranteed rollup rate of up to 9% of your initial investment for up to 10 years that may be available at the time of this taping. Not all insurance companies offer this option though. Two, you have a few years before you retire, but want to lock in a future guaranteed lifelong income at current rates right now, while hoping to see some potential additional growth along this last stretch before retirement. 3. You're already in retirement and want a bit of monthly income top-up in a few years' time, either for yourself or a surviving spouse. Feas with income riders can create a safe base for your portfolio, as we call it, that may not only allow you to sleep well at night, but also perhaps give you the security and confidence to potentially take on a bit more controlled risk for possibly higher returns with the remaining boost part of your portfolio. At the time of this taping, a 65 and 66-year-old couple in California who invested $100,000 into a fiat with an income rider from an A double plus rated insurance company and waited seven years before they took their first guaranteed annuity paycheck, might have earned a lifelong guaranteed income of $12,796 per year from year eight. If they waited 10 years before they took their first guaranteed annuity paycheck, they might even have earned a lifelong guaranteed income of $15,200 per year from year 11. And if you're further from retirement but like the current rates and market levels and want to lock in a future guaranteed lifelong income stream from some point in the future, the same mechanism from fias with an income rider can work quite well. For example, for a $100,000 investment, a slightly younger single male or female of 60 living in Florida who perhaps is willing to take on a bit more risk with an A plus rated insurance company and let his or her money grow for 12 years with roll-ups might start receiving a guaranteed lifelong income of up to $19,894 per year from age 72. As I've already mentioned, in our minds, these are quite attractive guaranteed payouts on a one-off investment of $100,000 and may or may not be easy to replicate if the investors, in our example, were to wait to lock in their retirement income in 10 or 12 years only. That said, many fias with an income rider do not force you to take the income. Recall that a fiat always guarantees 100% of your principal while letting you participate to some degree in the upside of a chosen index. As long as you haven't taken the income yet, haven't turned on the income rider, as we say in the industry, you have the possibility to cash out your full surrender value after the initially committed minimum maturity of the fiat is over. For example, if you decide at that point that you no longer need or want the guaranteed lifelong income for whatever reason. Now, fias are not straightforward and may require a bit of time and effort to fully understand, as with most financial products that can be customized to your personal situation. Everyone's financial journey is different. So as always, email us at jenniferdimondnestic.com if you'd like to get connected with a trusted annuity specialist to see what your personal rates and conditions might look like whenever you might be watching this video. There's no one size fits all cookie cutter solution. Any annuity you buy should be customized specifically for you. Or take a look at this recent video here where we walk you through some detailed Fiat numbers. I've linked it below for your convenience as well. Alright, Diamond Nestec members, Super Savers, and Course fans, I hope you enjoyed this video and learned something new. And see you again very soon with more brand new wealth building content for your financial journey.