When markets correct, it’s not just about staying invested—it’s about staying prepared. For high-net-worth retirees, a severe market correction can disrupt income streams, alter long-term planning assumptions, and create liquidity stress—particularly when private investments and capital calls are involved. Smart retirees don’t wait for volatility. They plan for it.
These strategies can help retirees protect their wealth, lifestyle, and peace of mind during market downturns:
1. Segmenting Liquidity for Living Expenses
We often advise retirees to segment liquidity into three buckets:
- Short-term (0–12 months): This bucket is held entirely in cash or cash equivalents—money market funds, T-bills, or high-yield savings accounts. It covers regular living expenses like household costs, healthcare, travel, and taxes.
- Mid-term (1–3 years): This holds ultra-liquid, low-volatility investments like short-term bonds or bond ladders. In the event that equity markets remain depressed for a prolonged period, these assets provide a cushion.
- Long-term: Everything else can stay invested according to their long-term plan, with rebalancing done opportunistically.
By separating assets in this way, clients avoid the psychological and financial trap of selling long-term holdings at a loss to cover everyday needs.
2. Planning for Known Capital Calls and Private Investment Liquidity
Private investments often perform well over time, but they can be illiquid and unpredictable when it comes to capital calls. Retirees often overlook how disruptive a capital call can be during a market correction—especially when they are forced to liquidate depressed public assets to meet obligations.
To prevent this:
- We forecast expected capital calls based on historical pacing and the investment’s funding schedule.
- We earmark capital call reserves in short-duration fixed income or structured liquidity solutions (e.g., a line of credit secured by a diversified portfolio).
- Some clients opt for a private investment reserve account— a designated pool solely for anticipated capital calls and private commitments.
This proactive strategy ensures private commitments do not jeopardize public investment plans.
3. Using Lines of Credit Strategically
Retired clients with significant portfolios or real estate often maintain secured lines of credit (SLOCs or HELOCs) as a backup liquidity source. These lines are not used for lifestyle spending, but they provide:
- Tactical flexibility during drawdowns
- An emergency bridge for capital calls
- A buffer while waiting for private investment distributions or refinancing events
The key is setting these up before they are needed—when markets are stable and asset values are strong.
4. Stress Testing the Plan
We stress test retirement income plans regularly, running scenarios that simulate:
- A 30%+ drop in equities
- Illiquidity in private investments
- Delayed distributions or a recessionary environment
This helps ensure our clients can maintain their lifestyle and commitments—even in worst-case scenarios. When you have already visualized the impact of a market correction, the actual event becomes less stressful.
5. Behavioral Guardrails and Communication
We coach clients to expect corrections. Instead of asking “if,” we plan for “when.” This includes:
- Having a communication plan so they are not reacting emotionally.
- Revisiting long-term goals to reinforce the purpose of their portfolio.
- Considering opportunistic rebalancing or Roth conversions when market dislocations present opportunities.
Liquidity Is Confidence
When markets shake, liquidity provides the calm. Retirees who plan thoughtfully for both lifestyle and investment obligations never have to wonder if they can ride out the storm—they know they can. That is the power of a customized, proactive plan.
If you want to know how protected your financial plan is against a correction, reach out—we’re here to help you preserve peace of mind no matter the market.
Disclosure:
This material is provided by Gryphon Financial Partners, LLC (“Gryphon”) for informational purposes only. It is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation of any particular security, strategy or investment product. Facts presented have been obtained from sources believed to be reliable. Gryphon, however, cannot guarantee the accuracy or completeness of such information. Gryphon does not provide tax, accounting or legal advice, and nothing contained in these materials should be taken as tax, accounting or legal advice. Individuals should seek such advice based on their own particular circumstances from a qualified tax, accounting or legal advisor.