Query: Two years ago my husband took an early retirement when offered by his company.  At the moment we had a 401(k) with about $550,000 that we gave to a giant financial services firm rep to handle. Since then we’ve lost $88,000 as a result of poor market conditions and decisions. We expressed our need for a conservative approach. A big portion is tied up in bonds and that quantity appears like way an excessive amount of to lose! 

What’s worse, the agent keeps telling us that our $4,750 monthly draw is simply too much. Do we alter agents throughout the company?  Jump ship and transfer all the pieces to a different company?  Do we have now to continue to exist lower than we wish to simply to make up for the loss? (On the lookout for a financial adviser too? This tool may also help match you with an adviser who might meet your needs.)

Answer: There are a number of inquiries to ask here: First, did your adviser do you flawed with those big losses; second, is your withdrawal rate reasonable; and third, what do you do concerning the adviser situation? 

Let’s start at the highest: Is $88,000 of a $550,000 portfolio an excessive amount of to lose, especially considering you asked for a conservative approach? In keeping with these figures, you lost 16%, which is definitely lower than the U.S. stock market was down overall (as of the writing of this letter), but barely higher than the general bond market. Your adviser likely thought bonds could be a solid investment, as they’re notoriously secure, but aggressive rate of interest hikes throughout last yr made returns on bonds hit recent historic lows.

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Indeed, last yr was a difficult yr for each the stock and bond markets, with US stocks down almost 20% in response to Fortune and bonds down around -13% in response to CNBC. “In relation to investing, each in stocks and bonds, it must be expected that your portfolio will go up and down. Historically, it tends to go up rather more than it goes down, but last yr happened to be a yr when it was down,” says certified financial planner Taylor Jessee at Impact Financial. (On the lookout for a financial adviser too? This tool may also help match you with an adviser who might meet your needs.)

But one other big issue here is your withdrawal rate — and on that your adviser has a degree. “A $4,750 monthly withdrawal equals roughly a ten% withdrawal rate out of your portfolio. The widely-accepted withdrawal rate in retirement is around 4%, meaning you’re withdrawing greater than double what is mostly considered a secure amount,” says Jessee. In truth, certified financial planner Jim Hemphill at TGS Advisors says that is “absurdly, unsustainably high, unless you each retired well into your 80s. We all know that’s not the case because you took an early retirement.”

Give it some thought this manner: With a ten% withdrawal rate, your portfolio must earn no less than 10% so that you can break even, otherwise you’re dipping into the principal. “Historically, the stock market returns about 9% per yr but most retired couples’ portfolios usually are not 100% invested in stocks, meaning a retired couple often shouldn’t expect to earn the stock market average. A diversified portfolio may earn around 5% to six% on average, so when you’re withdrawing 10% per yr from the portfolio, you’ll be able to see how the mathematics would begin to work against you actually quickly,” says Jessee.

Indeed, Hemphill says you might have to continue to exist lower than you would like because what you would like is unrealistic. “Not due to market conditions, because returns don’t exist that may support a ten% plus distribution rate,” says Hemphill

For his part, certified financial planner Derieck Hodges at Anchor Pointe Wealth says longevity becomes a priority with the withdrawal you’re taking. “Decreasing your balance annually might not be a priority when you’re in your 70s or 80s, however it may imperil your future financial security when you’re younger. Evaluating your spending and withdrawal needs is sensible,” says Hodges. What’s more, when you can reduce your distribution during this difficult investment market, it can likely bolster your financial security, in response to Hodges. 

Going forward, you’ll want to judge your age, health, likely longevity and future spending needs. “How much investment risk are you able to tolerate? Lower risk tolerance investments produce lower investment returns. Are you able to accomplish your financial goals with those small returns? Don’t evaluate risk and return by only considering recent history, you should take an extended view,” says Hodges. 

It is best to also review your mixture of investments and evaluate the historical returns in comparison with an appropriate benchmark. “Should you like a mix of 60% stocks and 40% bonds, don’t compare your investment results to the S&P 500, which is 100% stocks. As an alternative, use an index just like the Morningstar US Moderate Goal Allocation to judge under or over-performance,” says Hodges.

Most significantly, don’t panic or make rash decisions. “Deliberately keep evaluating your needs, goals and desires and keep in mind that 2022 was painful for virtually every investor, even those owning quality, diversified investments,” says Hodges. 

Hemphill recommends getting objective advice from a credentialed adviser who will inform you information you won’t like hearing. “One or each of you might need to return to work,” says Hemphill.

To go looking for credentialed advisers, visit the National Association of Personal Financial Advisors (NAPFA) or XY Planning Network, where you should use a tool to search out planners with the CFP designation and certain specialties. 

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Questions edited for brevity and clarity.