When it comes to the stock market, geopolitical affairs, and trade wars, 2025 has been nothing short of rowdy. The stock market doesn’t like uncertainty, and that’s precisely what 2025 has been. However, stock market volatility is normal. That doesn’t mean it’s fun or easy to handle, but it is routine. In this article, we’ll go over stock market crashes and whether you should be concerned.
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Stock Market Crashes: Should You Be Worried?
You may have heard a lot of talk this year about a stock market crash, and you may be wondering: should I be concerned? We’ve seen a lot of volatility this year. This feels especially true coming off of the last several years, which were really good in the market with double-digit returns consecutively. That doesn’t happen too often. In fact, the last time it happened was in 1998 and 1999. When you think about it that way, it’s been a long time. And right after that, we saw the dot-com bust.
At REAP Financial, we don’t believe we’re headed for another dot-com bust, but we do want to point out the ups and downs in the market. Oftentimes, we forget the market typically goes down faster than it goes up. Because of this, it can be easy to look at steady, stable investments and see them as boring. You may even get a little greedy or impatient, thinking you should move it into something that will yield more. In the end, stock market crashes have been inevitable since the beginning, and they are not something to be overly concerned about. However, when it comes to retirees, stock market crashes are more critical for a few reasons.
Why Stock Market Crashes Are Different for Retirees: Time
First, stock market crashes are different for retirees because they don’t have decades of time to save and may even be drawing down their portfolios. If you think back to your twenties, thirties, or even forties, you weren’t touching your retirement savings. In fact, you couldn’t touch it without significant taxes and penalties. The IRAs and 401(k)s were just helping you sock away money. And so, when the market dipped down, you were likely contributing to these accounts and buying at cheaper prices. Then, when the market came back, you saw the benefits. This is even more true when you’re not drawing on your portfolio during market crashes, since they create meaningful market opportunity. In fact, this volatility is key even as you approach retirement for Roth conversions and dollar cost averaging.
As many of you know, Roth conversions are one of the most powerful ways to gain control over your taxes in retirement. They can help you preserve your wealth and help it grow tax-free. For example, if you have a 401(k) and the market dips 30%, you can imagine your account dips 30% as well. While that is no fun and not the time to sell, it can be a good moment to convert. When you convert in your IRA or 401(k), you’re not selling at market low. Instead, you’re converting the same share of stock at a market low to a different tax-designated account called a Roth. In the example, that money was converted at a 30% discount and when the market turns around, the growth on the Roth will be tax-free.
Second, when you’re investing in the market and it drops 30%, you believe the market will rebound at some point, so you continue to invest. We saw this just a few months ago. The market dropped thousands of points over only two days. During that time, many people sold. Then, on the next day, the market rebounded by 2,000 points. It was one of the largest rebounds in history, in response to the tariffs and talks of trade wars. You can’t predict the market, but this shows how powerful dollar cost averaging can be over time.
Then, why are market crashes so much more critical for retirees? It’s because retirees are dollar cost averaging out, not in. Retirees take money out of their accounts every month, alongside Social Security, to maintain their standard of living. So, when the market is going up in good years, the money you’re taking out is likely just the growth. In some cases, you may even have more money than you had at the beginning of the year, since the market has been performing well. However, when you’re taking money out of your portfolio every month and the market is in decline, it can feel like a downward spiral. In this case, you need to have a contingency plan. Do you have another type of account that’s not going down or possibly even going up that you could draw from instead?
The Importance of a Contingency Plan
You would be surprised how important a contingency plan can be and how much it can prolong your portfolio’s longevity. We’ve even shared examples over the years where a contingency plan extended a portfolio by over a decade. A contingency strategy could be as simple as having a cash account, CD, money market fund, checking, or savings account that you can draw on during difficult times. This is a useful strategy that can help you cope with the emotional swings that come with a volatile stock market.
Finally, if you worry when you think about stock market crashes, we encourage you to take a good look at what your money is doing. For many of you, your money will be about growth, income, and potentially preservation. So if you look at your portfolio and it’s moving in lockstep with the stock market, that’s not a good sign. That means you may need to diversify your portfolio to keep your money steady and stable. You should also have a contingency plan. Ideally, you want money that is generating income for you alongside your Social Security, and then money that is growing at or above inflation.
Even with a contingency plan, it can be difficult to block out the chaos of a turbulent market.
Ready to Strengthen Your Retirement Strategy?
At REAP Financial, we help successful families across Austin build resilient portfolios designed to withstand market volatility. If you’re unsure whether your current plan is built to weather a downturn, schedule a no-cost consultation today.
Contact REAP Financial
Phone: (512) 249-7300
Email: retire@reapfinancial.com
Office Address: 9414 Anderson Mill Rd #100, Austin, TX 78729
Chris Heerlein, a Texas native, is the CEO of REAP Financial and founder of REAP Private Client Group (RPCG), specializing in wealth creation, preservation, and growth for affluent individuals, business owners, and executives. RPCG provides expert financial and investment advice, advanced tax strategies, business succession planning, and unparalleled client service. Chris is a trusted financial advisor, author of Divorce With Dignity (2019) and Money Won’t Buy Happiness But Time to Find It (2017), and a columnist for Kiplinger Personal Finance Magazine.
He has been featured in Fortune, Money Magazine, Bloomberg Businessweek, and U.S. News & World Report. Chris also hosts Wealth Radio on NewsRadio KLBJ and is a sought-after speaker. Based in Austin, Texas, he lives with his wife, Hannah, and their three children and actively supports charitable causes.
