3 Things to Do if the Stock Market Crashes as Soon as You Retire

A stock market crash early in retirement could put you at risk of running out of money down the line.

Reducing spending and avoiding panic-selling could help you preserve your savings.

Many people spend decades saving money for retirement. So once that stage of life kicks off, it's time to start spending the money you worked hard to sock away. But sometimes, bad timing can get in the way of your retirement plans.

If the stock market experiences a steep decline as soon as you retire, it can threaten the nest egg you worked hard to build and eventually put you at risk of running out of money. It's called sequence-of-returns risk, and it can derail an otherwise solid financial strategy.

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The problem with an early market crash in retirement is that if you continue tapping your IRA or 401(k), you'll have fewer assets left in that account once the market recovers. So it's important to know how to pivot in a situation like this. Here are three key things to do if you find yourself dealing with a stock market crash as retirement begins.

When your retirement account balance plunges, it can be tempting to start selling stocks and replacing them with safer assets. That's a bad idea, though. Locking in losses after stock prices have fallen could make it much harder for your portfolio to recover when the market rebounds.

History shows that the stock market has a tendency to recover from adverse events, but it can take time. If you sell your stocks right away, you won't be able to participate in that recovery. So rather than dump your stocks, try to identify assets in your portfolio that haven't lost value, and use those to generate income.