Near or in retirement, the danger is not the crash itself but having to sell stocks during it. Here is how a cash reserve, short bonds and the stock share work together, with recent crash data and a $1.2 million example.
Market risk reading, cross‑asset context and an events calendar: see Exent →
Arrange the money so a crash never forces you to sell stocks at the low. Once withdrawals start, every sale in a falling market locks in a loss, so the goal shifts from limiting the paper loss to protecting the spending. Four steps, usually in this order:
This page covers the years around retirement; the wider toolkit is in portfolio protection, and the plan‑specific levers are in how to protect your 401(k) from a crash.
Data through the close of Nov 2, 2026. The S&P 500 fell 1.7% over the last five trading days, and the Nasdaq‑100 fell 4.4%. The S&P 500 is 3.5% below its record close of Oct 6: a small dip from its record. It is 3.1% above its 200‑day average (+5.2% a week earlier). Its 20‑day volatility is 11.3% a year, about normal for the period since 2016.
Daily closes over the last year, through Nov 2, 2026. Green: the index above its average; red: below it.
Returns through Nov 2, 2026, dividends and interest included.
| Asset | Last 5 days | 1 month | Year to date | 1 year |
|---|---|---|---|---|
| T‑bills, 1–3 months (BIL) | +0.1% | +0.3% | +3.0% | +3.7% |
| Treasuries, 1–3 years (SHY) | +0.3% | +0.8% | +1.3% | +2.1% |
| Treasuries, 7–10 years (IEF) | +0.8% | +3.1% | −1.6% | −1.4% |
| Treasuries, 20+ years (TLT) | +0.5% | +5.9% | −2.6% | −5.2% |
| US bond market (AGG) | +0.5% | +2.4% | −0.4% | −0.1% |
| Gold (GLD) | −1.7% | −4.9% | −8.7% | −2.3% |
| Min‑volatility stocks (USMV) | −0.3% | +4.9% | +10.6% | +12.2% |
| −1× S&P 500 (SH) | +1.9% | +2.8% | −6.1% | −5.8% |
Last updated Nov 2, 2026. Members only.
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|---|---|
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Because withdrawals sell more shares when prices are low, and those shares miss the recovery. This is sequence of returns risk: two retirees with the same average return can end far apart if one meets the crash in the first years of withdrawals.
The wait matters as much as the depth. In Exent’s data (Jul 2016 – Sep 2026), the S&P 500 took 126 trading days from its 2020 peak to a new high, 150 after the 2018 fall, and 513, about two years, after the 2022 peak. A retiree who can draw from cash for that long does not have to sell stocks at all. The waits after 2000 and 2007 were much longer, which is why the bond part matters too.
Two to three years of withdrawals is a common middle ground: long enough to cover a 2022‑length recovery, small enough to limit the drag on growth. Bucket plans hold one to two years in cash and several more years in short‑ and intermediate‑term high‑quality bonds (see the retirement bucket strategy). What each safe asset returned between the S&P 500’s peak and trough:
| Asset | Q4 2018 | COVID 2020 | 2022 bear | 2025 tariffs |
|---|---|---|---|---|
| S&P 500 (SPY), price | −20.2% | −34.1% | −25.4% | −19.0% |
| T‑bills (BIL) | +0.5% | +0.3% | +0.6% | +0.6% |
| 1–3y Treasuries (SHY) | +1.2% | +2.1% | −4.4% | +1.3% |
| 7–10y Treasuries (IEF) | +3.4% | +6.4% | −15.4% | +2.7% |
| US bonds (AGG) | +1.4% | −1.3% | −14.4% | +0.9% |
Only T‑bills gained in all four. Short Treasuries lost 4.4% in the 2022 selloff; 7–10 year Treasuries and broad bonds lost about 15%, because rates rose fast. Over calendar 2022 through December 28, the main US investment‑grade bond index lost 13.1% and a 60/40 mix of it and the S&P 500 lost 16.9%, according to LPL Research figures reported by Yahoo Finance. In 2008, by contrast, the same bond index rose 5.2%. A spending reserve has to hold its value in both kinds of crash, which is why it usually sits in cash or T‑bills.
Mixes that paired stocks with T‑bills rather than bonds. Rebalanced monthly, Jul 2016 – Sep 2026, hypothetical, before costs (“bonds” is the US bond fund AGG):
| Portfolio | Return a year | Volatility | Worst fall | 2022 bear | COVID 2020 |
|---|---|---|---|---|---|
| 100% S&P 500 | 15.2% | 17.8% | −33.7% | −24.5% | −33.7% |
| 60% S&P 500 / 40% bonds | 9.6% | 11.0% | −21.5% | −20.5% | −21.5% |
| 60% S&P 500 / 40% T‑bills | 10.1% | 10.5% | −20.8% | −15.0% | −20.8% |
| 50% S&P 500 / 50% T‑bills | 8.8% | 8.7% | −17.4% | −12.5% | −17.4% |
In the 2022 bear market the 60/40 mix with T‑bills fell 15.0% against 20.5% with bonds. The price is growth: 8.8% to 10.1% a year against 15.2% for the S&P 500 alone. Which trade‑off fits depends on how much of your spending the portfolio has to cover. For moving from one mix to another over several years, see how to de‑risk before retirement.
Illustrative. A retiree with $1.2 million withdraws $50,000 a year, about 4.2%. The table puts each mix’s worst fall since mid‑2016 in dollars and in years of withdrawals:
| Mix (Illustrative) | Worst fall | Loss on $1.2 million | Years of withdrawals |
|---|---|---|---|
| 100% S&P 500 | −33.7% | −$404,400 | 8.1 |
| 60% stocks / 40% bonds | −21.5% | −$258,000 | 5.2 |
| 60% stocks / 40% T‑bills | −20.8% | −$249,600 | 5.0 |
| 50% stocks / 50% T‑bills | −17.4% | −$208,800 | 4.2 |
Now add a reserve. With $150,000, three years of withdrawals, in T‑bills, this retiree could have drawn from cash through the whole 2022 bear market and its recovery without selling a share. The remaining $1.05 million can then hold the stock share the retiree can live with. Retirees whose pension or Social Security covers the essentials often have more room for risk with the rest; see investing near retirement.
Some do, and the reserve makes it easier, because spending no longer depends on the timing. Three common approaches:
Each rule has a cost: time out of the market and missed rebounds. Inside an IRA or 401(k) a switch is not taxed; in a taxable account every switch out is a taxable sale. Only the growth part changes; the cash reserve stays in place.
Hold two to three years of withdrawals in cash or T-bills, keep bonds short and high quality, and size the stock share to a loss you can afford in years of withdrawals. That way a crash does not force you to sell stocks at the low.
A common approach is to draw spending from the cash reserve rather than selling stocks, and to rebalance back to the plan instead of abandoning it. If there is no reserve yet, building one from bonds or new savings comes first.
Two to three years of planned withdrawals is a common middle ground. In Exent’s data the S&P 500 took about two years to regain its high after the 2022 peak, and short T-bills gained in all four selloffs since 2018.
Not always. In 2022 US bonds fell with stocks: the bond fund AGG lost 14.4% and 7-10 year Treasuries 15.4% between the S&P 500’s peak and trough, while T-bills gained 0.6%.
Retirement can last 30 years, so most portfolios still need growth, and T-bills returned 2.1% a year in Exent’s data since mid-2016 against 15.2% for the S&P 500. A reserve for near-term spending protects the plan without giving up all growth.
Among the mixes tested since mid-2016, 50% stocks and 50% T-bills had the smallest worst fall, 17.4%, and returned 8.8% a year, against 33.7% and 15.2% for the S&P 500 alone (hypothetical, rebalanced monthly).
Market intel provides a Risk ON / Neutral / Risk OFF reading from four pillars, cross-asset analysis, an events calendar and regular written notes. Context for reviewing a plan, not a crash forecast.
Educational content, not investment advice. Examples are illustrative; past performance does not guarantee future results.