Retirement is supposed to be the point when years of saving and investing finally start paying off.
But what if the timing is terrible?
Imagine retiring, beginning to draw on your portfolio, and then watching the ASX fall sharply within the first year.
That would be uncomfortable, but I do not think it automatically ruins a retirement plan.
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The early years can be particularly important
A market crash becomes more difficult when an investor is withdrawing money at the same time.
If shares fall heavily and I need to sell some of them to fund living costs, I am locking in losses while the portfolio is already under pressure.
That can leave less capital available to participate in the eventual recovery.
This is often described as sequence-of-returns risk. The order in which good and bad years arrive can have a major impact once withdrawals begin.
Two retirees could earn the same average return over a long period and still end up with very different outcomes depending on when the weakest years occurred.
I would avoid relying on forced selling
If I were approaching retirement, I would want enough flexibility that I was not forced to sell ASX shares immediately after a large fall.
That could mean keeping some cash or lower-volatility assets available for near-term spending.
It could also mean holding companies that continue generating dividends through weaker markets like Coles Group Ltd (ASX: COL) or Telstra Group Ltd (ASX: TLS), although I would never assume those payments are guaranteed.
The aim would be to give the growth side of the portfolio time to recover.
I would still keep growth investments
A crash just after retirement might tempt an investor to move everything into cash.
I would be careful about doing that. Someone retiring at 60 or 65 could still have decades of investing ahead of them. Over that timeframe, inflation can gradually erode the purchasing power of a portfolio that is too defensive.
I would still want exposure to strong ASX businesses and potentially international shares or exchange-traded funds (ETFs) that can grow earnings over time.
The balance between growth and stability may change, but I would not want retirement to mark the end of long-term investing.
Spending can also be flexible
Another tool is simply adjusting withdrawals when the ASX share market is weak.
If the portfolio suffered a large fall, I might temporarily delay major discretionary spending or take slightly less from the portfolio if my circumstances allowed.
Even small changes can reduce the pressure to sell assets at poor prices.
That flexibility becomes much easier if retirement spending has been planned with some margin for error.
Foolish takeaway
An ASX share market crash immediately after retirement would be a difficult start, but it does not have to derail the years ahead.
I would want a retirement portfolio that gives me options during weak markets rather than depending on continually rising share prices.
For me, the combination of some near-term liquidity, ongoing growth exposure, diversification, and flexible withdrawals would make a bad first year far easier to manage.
