The Next Big Stock Market Correction, And Why It Shouldn’t Derail Your Retirement

With stock market prices continuing to push toward new highs despite persistent economic uncertainty, you don’t have to look far to find someone predicting the next big crash. 

Turn on any financial news channel. Open any investing website. The prognosticators are everywhere with each one competing for your attention with increasingly alarming headlines about why this time the market is headed for serious trouble. 

Given all of this noise, a very natural question is: “What is our strategy if we have another big market correction?” 

It’s a great question. But I’d like to suggest a small but important change in how we phrase it. 

Not “if” we have another significant correction. “When.” 

Here’s the truth that the financial media can strategically omit from their reporting: major market corrections are not rare, unpredictable disasters. They are a completely normal, entirely expected, and historically temporary feature of long-term investing. Once you truly accept that, not just intellectually, but emotionally, your entire relationship with market volatility can change. 

Let me show you the data that supports this and then share the strategy that can allow you to remain confidently invested through all market cycles. 

What the Historical Data Actually Shows 

Let’s start with the facts. 

The typical year includes a significant decline. 

According to J.P. Morgan Asset Management’s Guide to the Markets, one of the most comprehensive and widely cited institutional research publications in the financial industry, the S&P 500 Index has experienced an average intra-year peak-to-trough decline of 14.1% going back to 1980. That means in a typical year, at some point — in January, in August, in November, whenever — stock prices fall 14% before recovering. 

To put real dollars to that number: if the stock portion of your retirement portfolio is $2,000,000, the average year includes a moment when that balance temporarily reads approximately $1,720,000. If it began at $4,000,000, it would temporarily read $3,440,000. 

The two most important parts of that sentence are “stock portion” and “temporarily.” We’ll come back to both. 

In spite of that, most years still finish positive. 

Here is what makes the 14.1% average intra-year drop far less frightening in context: despite that average decline, the S&P 500 Index still finished the year with positive returns in 38 of the 46 years from 1980 through 2025, or 83% of the time. (Source: J.P. Morgan Asset Management, Guide to the Markets, updated through 2025) 

Please stop and read that again. The market has dropped an average of 14% at some point during a typical year and still finished positive more than four times out of five. 

Serious bear markets are less frequent than you think. 

Since 1950, the S&P 500 Index has experienced approximately 14 bear markets, defined as a peak-to-trough decline of 20% or more. That works out to roughly one every five to seven years, though they don’t arrive on a schedule. Some decades see multiple bear markets. Others see almost none. (Sources: Plus500/WSBTV, “Every Major Stock Market Correction Since 1950”; A Wealth of Common Sense, Ben Carlson, 2021) 

The average bear market decline has been approximately 36%, with the worst being the 2007–2009 financial crisis at 56.8%, the most severe since the Great Depression. The dot-com bust of 2000–2002 fell 49.1%, and the COVID crash of 2020 declined 34% in just thirty days. (Sources: FactSet; S&P Dow Jones Indices; Yardeni Research) 

Every bear market has fully recovered. 

Here is perhaps the most important statistic in this entire article, and the one typically ignored by the financial media: in every single bear market since 1950, without a single exception, the S&P 500 recovered fully to new all-time highs. 

The average recovery time from trough back to a new high has been approximately 28 months or just over two years. The fastest was the COVID crash of 2020 which recovered in just 5 months. The slowest was the dot-com bust of 2000–2002 which took approximately 86 months. (Source: Historical bear market data compiled from FactSet, Yardeni Research, and S&P Dow Jones Indices) 

And despite all of it — the Great Inflation of the 1970s, Black Monday in 1987, the dot-com collapse, the worst financial crisis since the Great Depression, a global pandemic — $10,000 invested in the S&P 500 at the beginning of 1950 grew to nearly $40 million by 2026 with dividends reinvested, compounding at approximately 11.5% per year. (Source: OfficialData.org S&P 500 Return Calculator, officialdata.org/us/stocks/s-p-500/1950) 

The long-term direction has been clear. The short-term volatility along the way was simply the price of admission. 

What You May Hear During the Next Correction 

With all of this data in mind, I want to prepare you for what will likely happen again during the next significant market decline because being prepared for it in advance can be far more valuable than reacting to it in the moment. 

When prices fall sharply for four or five consecutive days, here is what you often hear from the financial media, from friends, from co-workers, and from the majority of Americans: 

“Here we go again. I knew it was too good to be true.” 

“I can’t afford to suffer these losses.” 

“I can’t see it ever coming back in my lifetime.” 

“Everybody is selling. I’m getting out until things settle down.” 

“What do you think of gold?” 

“What about the guarantees fixed annuities promise?” 

And perhaps most dangerously, you could hear what legendary investor Sir John Templeton called the four most costly words in all of investing: 

“This time is different.” 

The circumstances are always unique. The emotional experience always feels unprecedented. And the recovery has historically followed for those who stay invested long enough to receive it. 

Four Principles That Guide Our Strategy 

Understanding why we invest is just as important as knowing what we do. Here are some core principles that underpin everything: 

Markets are efficient. In an average day in 2025, over $1.1 Trillion of stock shares changed hands on nearly 100 exchanges around the world. With that volume of activity, every stock’s price at any given moment likely already reflects all available information. The idea that you or I possess insight that millions of global investors don’t have, and that we can act on it profitably and consistently, is not supported by the evidence. 

Risk is the source of returns. Every investment carries an expected return. Higher-risk investments, those with wider short-term swings, carry higher long-term expected returns precisely because they compensate investors for tolerating that volatility. Lower-risk investments carry lower expected returns. There is no such thing as stock market returns with the safety of Treasury bills despite the fact that the financial media spends considerable energy implying otherwise. Volatility is not a problem to be solved. It is the mechanism through which long-term returns are generated. 

There is no such thing as a “market selloff.” Every share of stock that exists is owned by someone at every moment. When a share is sold, a willing buyer on the other end of the transaction agrees to pay the price at which the transaction occurs. Prices may fall, but the shares don’t disappear. Headlines that scream “investors flee the market” are emotionally compelling and factually misleading. 

Market timing doesn’t work. Selling before prices fall and buying before prices rise sounds logical. In practice, it is extraordinarily difficult to execute successfully. Nobel Laureate and Stanford finance professor William Sharpe, in his landmark 1975 paper “Likely Gains from Market Timing” (Financial Analysts Journal), concluded that a market timer would need to be precisely correct on both the sell and buy points 74% of the time simply to equal the returns of someone who stayed invested through all market cycles. (Subsequent studies by multiple researchers arrived at similar conclusions, requiring 70–85% accuracy to outperform a passive buy-and-hold strategy.)  

Professor Kenneth French of Dartmouth, co-developer of the Fama-French factor models and a leading voice on evidence-based investing through Dimensional Fund Advisors, has reinforced this research extensively demonstrating that market timing is not a viable long-term strategy for investors. (Source: Dimensional Fund Advisors, “Kenneth French on Market Timing,” dimensional.com) 

The Strategy That Can Make All of This Work in Practice 

Accepting market volatility intellectually is one thing. Having a structure in place that allows you to live through it without flinching is another.  

Once you have calculated how much you need to withdraw from your retirement portfolio each year to support your desired lifestyle, start by keeping a minimum of five years’ worth of anticipated withdrawals in money market funds and short-term fixed income instruments. These defensive holdings experience significantly less volatility than stock index funds.  

Additionally, unlike your working years where you allowed your dividends to reinvest back into your stock investments, we recommend flipping that switch and allowing all dividends from your stock index funds to flow into your money market funds.  This is an often overlooked but critically important detail that’s designed to help further cushion your near-term cash flow. 

The remainder of your retirement portfolio can then be broadly diversified and strategically weighted across several asset classes during all market cycles with a goal of capturing higher-expected market returns within each.   

What this structure means practically: even during the worst bear markets on record, it’s highly likely you would not have been forced to sell any of your strategically allocated stock index fund portfolio at a loss to fund your lifestyle. Your five-plus years of defensive reserves, plus your accumulated dividends, give the market the time it has historically needed to recover while you continue spending with greater confidence.  

When stock prices rise above your target allocation, your goal is to rebalance back in a tax efficient manner.  When stock prices fall during a correction, you target rebalancing in the opposite direction buying more shares at reduced prices, i.e. discipline in both directions. 

The Choice You Will Make During the Next Correction 

When the next average intra-year market decline arrives, there will be two common responses available to you. 

The first: “I’ve lost 14% of my portfolio. There’s no end in sight and I’ll never get it back.” 

The second: “I’m experiencing an ordinary, temporary market correction, the kind that has occurred dozens of times in the last 75 years and resolved every single time. My withdrawal strategy supports my long-term and it likely means I don’t need to sell anything. I’ll let it work.” 

This evidence-based investment philosophy is designed to help make the second response not just intellectually available to you, but hopefully easy to choose. 

Investors who have built and preserved real wealth over time are historically not the ones who found a way to avoid market volatility. They are the ones who accepted it as normal, structured their portfolios to help withstand it, and stayed invested long enough to be rewarded by it. 

That is the experience we are committed to helping you have for the rest of your life. 

If you’d like to review your current strategy and make sure your Retirement Portfolio is properly structured for the inevitable volatility ahead, we invite you to schedule a complimentary Retirement Strategy Assessment™ today. 

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This is intended for informational purposes only. You should not assume that any discussion or information contained in this document serves as the receipt of, or as a substitute for, personalized investment advice from Savant. 

Please consult your investment professional regarding your unique situation. 

Historical performance results for investment indices, benchmarks, and/or categories have been provided for general informational/comparison purposes only, and generally do not reflect the deduction of transaction and/or custodial charges, the deduction of an investment management fee, nor the impact of taxes, the incurrence of which would have the effect of decreasing historical performance results. It should not be assumed that your account holdings correspond directly to any comparative indices or categories.