Hold steady. And if you have a little ice in your veins, you might even consider investing a little more into the stock market despite concerns about inflation and a recession.

That's the advice to retirees and those on the cusp of retirement from financial experts locally as the bear market on the stock exchanges roars on, with composite averages down about 20% and CBS News reporting that retirees have already seen a $3 trillion drop in their assets.

"It's not just the stock market that people are worried about; it's beyond that," Robert Henderson, principal of Lansdowne Wealth Management LLC in Mystic, said during a phone interview.

Henderson cited rising inflation and higher mortgage rates as among the concerns. And he said there seems to be no safe place to park your money, since both bonds and stocks are on the downswing.

"We might be in the midst of a recession right now, and we just don't know it," he said.

One thing that could calm fears would be the Federal Reserve's decision to ease back on interest-rate hikes that so far have been throttling up to try to soothe inflation rates above 8% in the past two months. "You'll see the market start to ease back into a bit of normalcy" once the interest-rate hikes stop, he said.

Josh Lyons, principal of Lyons Asset Management in Mystic, said those who are not risk-averse should actually be thinking about getting back into the market in increments, focusing on solid companies with good dividends.

"Invest in value stocks and ride that volatility," he said. "This is a position we haven't seen in 10 to 12 years" when the financial collapse and Great Recession took stocks down 50%.

Lyons blamed much of the current volatility on the COVID-19 pandemic and the resultant supply disruptions as well as Russia's war against Ukraine, which has led to a spike in world oil prices. On the positive side, he pointed out that most corporate earnings remain strong, consumer demand is still high, wages have gone up and employment numbers keep improving.

"If you pick good, strong corporations that are doing things right ... and are undervalued now, they are coming back faster and stronger," Lyons predicted.

Every local financial adviser contacted recommended that retirees have at least some of their money on the sidelines as a hedge against further downturns, but also to ensure you aren't forced to sell investments in a down market. Recommendations on how much money to set aside varied from enough money to fund six months to three years of your current lifestyle, keeping funds in low-risk investments such as money market funds.

"Knowing that you have cash on hand when needed can help to alleviate stress and concern when the market is volatile," said Nancy D. Butler, a business coach from Waterford with more than 40 years of financial services experience. "When the market declines, there is no way to know when it will rebound."

The longest bear market in the modern era, during the 1970s, lasted 630 days, while the shortest, during COVID-19, took the market down 34% in only 33 days. The Great Depression entailed a series of 12 bear markets that lasted a total of 13 years, however.

Lyons and Henderson both said their clients have so far stayed the course, thanks partly to early communication as the stock market downturn became more pronounced.

"You manage expectations, you don't have as many issues," Lyons said. "You have to be careful what you hear and listen to. ... It's a good time to be smart."

A 70-year-old local businessman who just retired for the third time understands about managing expectations. He didn't want his name revealed so he could talk frankly, but said his first retirement in the year 2000 after 25 years in the corporate world was quickly put on hold after the 9/11 attacks crushed the stock market, making his stock options almost worthless and pushing his 401(k) value down about 40%.

"It took about three or four years before the market recovered from that event," he said in an email. "Still, I thought we were OK with retirement funds, so I enjoyed many years coaching the boys in soccer, basketball and baseball and doing some part time volunteer work and consultings."

Then the Great Recession of 2007-09 hit, chopping the value of his retirement funds almost in half. So it was back to work running a retail establishment in Niantic that he also owned. It took six years, he said, before his investments were back to 2006 levels.

Then in 2011 he joined a private equity firm, where he stayed until 2017, when he retired for the second time. He had hoped to sell the retail shop he owned and a local sports facility he had invested in a few years later to fully retire, but then COVID-19 hit, spoiling his plans yet again.

"I needed a better crystal ball to have predicted 9-11, the Great Recession and COVID-19," he said. "But it's all turned out OK. It just takes constant adjusting of the plan."

Just in the past few weeks, he managed to sell both his Niantic business and the sports facility. He said the completion of the two sales made retirement this time feel completely comfortable, both mentally and financially. The pandemic had affected both businesses, and by selling he also felt like he had managed to reduce the risk that repeat waves of the coronavirus would continue disrupting the businesses.

"I never wanted to go through that effort and stress again," he said. 

Rebalance your portfolio

Butler said people who have not yet retired but are thinking about it should evaluate what kind of income they will need after their regular paycheck stops.

"While you are working, not only are you earning money but you also have less time to spend money," she said. "When you stop working, what do you plan to do with the 40 or more hours you will have on your hands every week? Many retirees today are remaining active, which can mean their income need during retirement is not much different than when they were working."

Butler stressed the importance of diversification and keeping your eye on risk tolerance and the timing of your retirement. For those with cash on the sidelines, she recommended gradually easing into the market by buying small amounts of stock over several months and at regular intervals because it's hard to time when the market will make a comeback; also, rebalancing your portfolio can ensure that your allocations are not too heavily weighted in one area of the market.

"For example, if you originally decided your portfolio should hold 20% in large cap stock and the market did really well, causing large cap to now represent 35% of your portfolio, you would sell 15% of your large cap holding (sell high) and use the proceeds to purchase more of the investments that are down in value (buy low)," Butler said. "Rebalancing your portfolio quarterly or semi-annually is generally recommended."

Some of the financial experts pointed out that solid, dividend-producing stocks can be a hedge against a down market. The stock price may go down initially, but the dividend — a percentage of the stock's value that varies from company to company — could provide a nice quarterly payment for those on a fixed income. And, of course, the stock price will be expected to recover eventually.

"Don't let market volatility, high inflation or other factors cause you to make a financial decision you will later regret," Butler said. "Have a plan and stick to it. A well thought out plan can help to weather whatever financial storm comes your way."

l.howard@theday.com