Is a Downturn On the Horizon_ How We Watch Over Your Money

By Sean Gerlin, CFP®, ChFC®, CLU® 

Many will say that the best way to handle a market downturn is to reign in your spending, hunker down, and wait it out. While that advice is effective in the right time and context, I believe the best way to handle a market downturn is to be prepared years in advance. I don’t think my clients should have to alter their lifestyle or the way they routinely save because the market naturally ebbs and flows. Instead, I focus on proactive planning that incorporates “worst-case” scenarios from day one. Here are 4 ways I help commercial real estate brokers proactively prepare for market downturns.

Identify Your Needs

The first step in preparing for a market downturn is to identify what a worst-case market looks like for you and how it would affect your revenue. For example, suppose I’m working with a hypothetical client named Gary. Through the initial planning process, Gary and I decide to plan for $1.5 million in revenue earned from his commercial real estate business. Of that, $175,000 will be distributed as W-2 salary income, and $200,000 would be taken as tax-free distributions. This is his baseline plan for a stable market environment. But I don’t want him to have to alter that in a downturn.

If the worst-case scenario we identify is a possible revenue decrease of $250,000, we will factor that into the baseline plan. By identifying specific dollar amounts and incorporating them into the plan from the beginning, it allows clients to be prepared for the inevitable dips in the market. 

Create a Cushion

Next, we will create a cushion so that clients can weather market downturns without drastically altering their lifestyles or drawing down their retirement assets. Using the previous example, I would want Gary to keep about $500,000-$600,000 in liquid assets, which would give him a one-to-two-year cushion in a market downturn. 

Though the ideal goal is to never alter your current lifestyle, it’s important to understand that a downturn can extend beyond our best estimates. In those cases, Gary would have to slow down withdrawals from his investments and reign in his spending a bit. But the good news is that our “worst-case” planning already factored in most of what he would need. Gary would have to experience a huge decrease in revenues before even having to consider changing his lifestyle. It’s unlikely that that level of downturn would actually occur, but it is a possibility that cannot go unconsidered.

This strategy is all about being conservative. To create a cushion, we will structure the investments so they always have enough liquidity in case of an absolute emergency.

Continue Long-Term Planning

The third step in preparing for a market downturn is to continue long-term planning with your retirement goals in mind. Many of my clients are working toward early retirement in their 50s, and that goal must be continuously reevaluated as the market ebbs and flows. It’s important to consider what you are willing to do if the market drops more than expected. For instance, if you don’t mind working a couple of years longer (retiring at 57 instead of 55), then you will have more flexibility with how much you can spend during a down market. 

The only long-term guarantee in investing is that there will be short-term fluctuations. There will be bear and bull markets in the decades ahead just as there have been in past decades. Rather than fear change, focus on preparing for it. 

By using a disciplined approach, focusing on the long term, and working with an objective advisor who understands investor behavior, you can keep your retirement plan on track without vastly altering your current lifestyle.

Consider Alternative Investments

Including alternative investments in your portfolio can be an effective strategy for preparing for a market downturn. Alt investments, including digital assets, real estate, private equity, and hedge funds, have a low correlation with the market as a whole, meaning they will help to keep your portfolio afloat when typical assets like stocks and bonds are performing poorly. 

They would typically be held anywhere from 7 to 10 years, during which time they can provide distributions and an influx of cash at the time of maturity. We can work together to develop a laddering schedule so that each investment matures sequentially, providing a steady stream of cash flow across multiple years. This will help you achieve and maintain the cushion you need to weather a market downturn without compromising your day-to-day lifestyle. 

Are You Prepared for a Market Downturn?

At Envision Wealth Partners, we believe that a drop in the market shouldn’t affect your overall lifestyle. We plan for the worst-case scenarios up front so you can feel confident in our strategies even during a market downturn. To learn more about our proactive wealth management process, schedule a no-obligation introductory phone call or reach out to me at or 407.720.6535.

About Sean

Sean Gerlin is founder, principal, and a financial planner at Envision Wealth Planners, an independent financial advisory firm founded on the core values of family, honesty, and a determination to be a master of the trade. With almost 10 years of experience, Sean specializes in serving affluent families and commercial real estate executives and brokers, providing comprehensive, customized financial guidance and services for their complex financial needs. Sean acts as a family CFO, managing and coordinating the many moving pieces of his clients’ financial lives. Sean is known for his commitment to building long-term relationships and paying personal attention to each client. He is passionate about helping his clients experience the relief that comes from having organized and well-planned strategies and portfolios, and he desires to help them by shouldering some of the financial burdens they face.

Sean has a bachelor’s degree from the University of Florida and holds the CERTIFIED FINANCIAL PLANNER™, Chartered Financial Consultant®, and Chartered Life Underwriter® certifications. When he’s not working, you can find him cooking, eating good food, traveling, coaching his son’s baseball team, or playing golf. He loves spending time with his wife, Nicole, and their two kids, Avery and Will, and entertaining friends in their beautiful backyard. To learn more about Sean, connect with him on LinkedIn.

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