The Coming Bear Market/Recession Can Save Your Retirement

All it takes is a life-changing shift of perspective to understand: A bear market and a recession could save your retirement from failure.

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In these uncertain times, when Social Security employees are being laid off in the tens of thousands, field offices all over the country are being shut down and phones go unanswered for 6 hours at a stretch, millions of retirees are calling their local offices in panic. They’re asking, “Will my benefit be sent to me this month? Will it be cut?

Fully 40% of Social Security recipients count that benefit as their prime source of income. In this regard, I would suggest that retirees and near-retirees quickly consider a new way of thinking about the shortfall in their retirements.

All it takes is a life-changing shift of perspective to understand: A bear market and a recession could save your retirement from failure.

Hey, it’s George. Thanks for reading today. Retirement: One Dividend at a Time is a reader-supported publication. Our goal is to bring you fact-filled, useful analysis that helps you reach your retirement goals with a growing stream of passive dividend income. We don’t have corporate backers, and would be so grateful if you took a moment to follow me and subscribe for free emails. This will get you an immediate notification whenever I publish new articles.

Want to see some scary stats? A Google search of "the retirement preparedness within America" can provide you with all the scary stats you could wish for.

While it's true that the average retirement account for people moving into retirement is in the 5-6 digit range ($10,000-$999,000), that includes all of those who have millions upon millions in their retirement account and includes those who have next to nothing – barely having two nickels to rub together – in their retirement account.

If you're reading this on Medium or Substack and have arrived by searching such terms as “Finance, Stock Market, or Investing”, there's a high likelihood that you are much more aware and concerned about your retirement and its future than others who aren't actively reading and researching retirement or investing topics.

There is a general lack of interest in the financial world, for the most part. Many of us are too busy scrolling on our cell phones or trying to figure out how to make our budgets stretch to worry about retirement.

Retirement seems like a distant, faraway period of time for most of us, understandably so. If you've made any number of poor choices that have led you into financial struggles and high levels of debt, it can be a hard-fought battle to get back out of it again.

So, when there is a drumbeat of news coming across the internet that a recession is likely coming, all of a sudden the reality starts to break through.

The Recession/Bear Market Good News

To most investor’s ears, recession and/or bear market doesn’t sound like very good news at all. In fact, to most, it signifies a whole lot of people are about to lose their jobs. Unemployment numbers will begin an unrelentingly upward rise and GDP will begin falling. Corporate reports will start reflecting lower sales and earnings and more and more CEOs will start guiding future sales and earnings lower.

Let me tell you something that I think most investors have never considered, no less even heard: A recession and a bear market may be exactly what the doctor ordered in order for you to see success in your retirement.

Decreasing Portfolio Value Strikes Terror into Her Heart

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To put it as bluntly as possible, most people can’t tolerate negative portfolio values. The larger the losses pile up, the greater the fear of another 2008-2009 financial crisis meltdown becomes. Remember that one? The S&P fell 57% over a two year period. The drip, drip, drip of lower portfolio values felt like the water torture it was.

Over a lifetime, we've been trained to dislike negative numbers and the color red. It's a Pavlov's dog-type situation. You’ll remember, Pavlov proved that you could make a dog salivate, simply by waiving a piece of meat before his face. B.F. Skinner then refined this observation into a theory of learning; our behaviors are developed or conditioned through reinforcements. He referred to this process as operant conditioning. Over your entire life, you are taught that red, with respect to the financial world, indicates something negative or bad. So, when you see it in your brokerage account, you don't like it. I'll be honest with you; I don't like it much, either.

The last time the market had a major downfall, during the pandemic era of 2020, my portfolio and the portfolio of my subscribers to Retirement: One Dividend at a Time saw a value drop as well.

Well, here’s the good news that I can tell you, having chartered my way through more than six decades of choppy waters and volatile investing. A portfolio that drops significantly in value in a bear market becomes the seed that sows a significant portfolio recovery in a bull market. Still, I didn’t appreciate seeing those negative numbers, just like you.

Instead of letting negative numbers drive you away from the market, however, let them play a different role. Allow them to be a call to action, something that motivates you and gets you up and going, instead of it being a reason that causes you to throw in the towel. Don’t let it push you into all cash forever, into avoiding the markets and touching them ever again.

This could be the exact reason you find yourself in the situation you are in right now. So flip that on its head and allow yourself to perceive the markets in a different light.

In order to do that, you need to recognize the gift that comes with lower prices. We need to look at the relationship between the dividend yield of a security and its price to understand better how that can work to your benefit when it feels like the sky is falling.

Yield and Price, an Inseparable Relationship

Remember in high school that perfect couple, the couple that just always seemed to work and everyone knew that they would be a couple and that they would last forever, even if they didn't? Some pairings just make sense. This is one reason why the peanut butter and jelly sandwich has been a default choice for kids' lunches for generations. But just because two things are paired together doesn't always mean we understand how they work. Or even if we do understand how they work, we don't always put it into proper perspective.

The dividend yield of a security is determined by the amount the company is paying out, which is typically a fixed dollar amount and the consistently variable price of the security on the stock market. This means that if a company is paying out $2 a year and trades for $200 on the stock market, it has a 1% yield. Because yield is simply an expression of a fixed amount when compared to a constantly varying amount based on supply and demand, yield can change rapidly.

If that same $200 stock falls to $100 and the dividend remains $2, its yield changes dramatically:

$2.00/ $100 = 2%

You see, a 50% fall in price will lead to a 100% increase in the yield.

Are you beginning to sense the potential that a bear market contains? For investors with recurring dividend income, above and beyond their spending needs, excess capital invested at dramatically lower prices in a bear market leads to huge potential for increasing an investor’s income in retirement.

A good and deep bear market could just be what solves the crisis of so many near-retirees that desperately need to boost their income in retirement.

In a bull market, when prices are rising rapidly, we can see yields shrinking rapidly. This makes good sense mathematically. But we don't have the same visceral reaction to a shrinking yield as we do to a shrinking stock price. This is because we don't view the yield as tangible capital that we are either getting or losing, even if it's unrealized.

I like to remind subscribers and readers that unrealized gains or losses are just that; "unrealized" – you don't pay taxes on unrealized gains because you haven't actually gained them yet, and you don't get to claim the losses on your taxes because you haven't lost anything yet. An unrealized gain or loss is like unrealized potential – just because you have potential, if you don't put it to work, you have nothing in the beginning anyway. Unrealized stays unrealized and on paper only, till you realize those gains or losses by selling assets or securities.

When the stock market is falling and embarking on a bear market, defined as a 20% fall from the latest peak, or when we enter into a correction, defined as a 10% fall from the latest peak, prices may collapse, but yields are skyrocketing. For investors in search of increasing their passive income, these are the moments when salivating for lower-priced stocks become the income-investor’s salvation.

The Pandemic crash of 2020 was one of the worst years for total returns for most investors. Anticipating the crash as the economy shut down, we counseled our subscribers to go to cash till the dust settled in order to preserve capital for later deployment.

Yet, for most of our members who joined in that time frame or the members who were even part of our community before it, the best years for their portfolio's income growth were 2020 and 2021. The reason was that every dollar they were able to re-deploy and reinvest past dividends into their portfolio starting in June, 2020, not only bought more shares at a much lower price but also earned them significantly more income per share than they had in the years prior because yields were elevated.

For the vast majority of our portfolio, the dividend paid out was either maintained or raised. We doubtlessly would have had some companies that suspended or cut their dividend had we held our shares during the crash– predictable when you have a portfolio with over 60 different names. As a whole, our income grew during that period, organically as well as from reinvestment.

Your Takeaway

This message was for a retiree or near-retiree who's looking at their portfolio, thinking a 4% withdrawal rate isn't going to cut it when inflation keeps rising. She’s thinking, “I need to retire and live off of this pile of money”. Or maybe she’s looking at her portfolio and saying “the income stream from my portfolio is not as much as I want it or need it to be”. Well, in a bear market, where yields are elevated because prices are falling, you will be able to create a very robust income stream. You’ll be singing, “Forget your troubles, come on get happy”.

Of course, this will require a different mode of thinking, one you are not conditioned for and one you are not accustomed to perceiving and acting upon. In order to make this a reality, you must be prepared in advance of the bear market.

You’ll need to accumulate a few years of cash to live on while the bear is mauling your portfolio. Doing so will keep you from selling any of your stocks at the lowest prices and converting them from paper losses to realized losses. This is what you want to avoid at all costs. Live off your cash during this period and your stocks will recover nicely with the next recovery.

There is never a bad time to build out the income stream that you intend to depend on in retirement. Unlike relying upon your expert skills in trading or your magnificent ability to find the exact options trade that you need to generate cash to live off of, dividend investing is exceptionally defensive. A dividend investor is much less likely to sell a security when its price falls if its dividend income stream remains stable or growing. This is because every single dividend provides a psychological balm that enables them to hold through volatility and allows them, in many regards, to outperform the average investor who panics when they see the price fall because they have no other form of return from the holding other than the change of its price.

Instead of seeing a bear market or a recession as a doom and gloom scenario where your entire portfolio value falls and you're going to be on the brink of financial collapse, learn to perceive a bear market or a recession as an opportunity to supercharge your portfolio's income generation and to set your portfolio onto a new plateau of annual income production. As discussed in our earlier example, a 50% drop in the market price of a formerly 6% yielding dividend stock presents a 12% yield for those who are brave enough to seek it. It is easy to pursue these opportunities if your portfolio keeps gushing dividends at regular intervals. The more income your portfolio can generate in excess of your expenses, the better. Every dollar you generate from your portfolio that you have to do nothing more than sit back and collect is a dollar you don't have to worry about trying to work for or scrounge up through selling securities or taking other actions.

There's a reason it's called passive income: because it means you don't have to do anything. Being an income investor using my unique income strategies and recommendations, you can have a truly passive and growing income. Yes, a recession can be scary. A bear market can be uncomfortable. It’s hard from most investors to see their life savings melt away in the markets. But both can provide an opportunity for your retirement to reach new heights.

Instead of running and hiding, embrace the opportunity to grow your income. It might just be what saves your retirement or brightens it further.

That's the beauty of my income strategies. That's the beauty of income investing.

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Subscribers to the Retirement: One Dividend At A Time investment newsletter who mirror the RODAT Portfolio have annual income in excess of $132,000.00 from dividends alone.

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Best,

George Schneider, M.A.

Founder and publisher

Retirement: One Dividend At A Time

Disclaimer: This article is intended to provide information to interested parties. As I have no knowledge of individual investor circumstances, goals, and/or portfolio concentration or diversification, readers are expected to complete their own due diligence before purchasing any stocks mentioned or recommended.

Disclosure: I am long all RODAT Portfolio names. The Portfolio continues to build dividend income with reliable, dependable equities which have long histories of increasing the dividend.

Copyright ©2025, George Schneider