When markets fall in retirement: keep paying yourself from your cash buffer, stop refilling it, and leave the core alone. Satellites that have broken their trend are already sold and waiting in cash. Trim discretionary spending if the fall runs long, check whether your Age Pension has gone up, and only put cash back to work when trends turn up again. The one thing not to do is sell your core in a panic.
Falls are a normal part of investing, and in a 25 to 30 year retirement you’ll see several. What matters is having a plan before it happens, so you’re following steps instead of reacting to headlines. Here’s ours, with the parts of my videos where I explain each step.
1. Falls are normal
Over the past 30 years, Australian shares had a negative financial year 7 times, and still returned 9% a year. Every asset that grows faster than cash has bad years.
A fall only becomes a permanent loss if you sell. If you hold, you still own the same number of units; the price has changed, not what you own. The problem in retirement is having to sell to pay your bills, which is what the cash buffer is for.
🎥 Watch me explain this
▶1:18How billions get wiped off the ASXWhere Does the Money Go When the Market Crashes? · from 1:18 · read the post- ▶3:24Have you lost anything if you don’t sell?Where Does the Money Go When the Market Crashes? · from 3:24 · read the post
- ▶4:41Why do prices fall in the first place?Where Does the Money Go When the Market Crashes? · from 4:41 · read the post
2. The playbook, step by step
- Keep paying yourself from the cash buffer. Your income doesn’t change. Nothing needs selling.
- Stop refilling the buffer. Refills only happen after good years. After a bad one, let the buffer run down.
- Leave the core alone. It’s diversified and held for the long term. Don’t sell it, and don’t try to time it.
- Let the satellite rules do their job. Satellites in a downtrend have already been sold at their exit level, so that money is sitting in cash.
- Trim spending if the fall runs long. Pause the big extras (a trip, a new car) for a year. A 10% cut for a couple of years makes the buffer last noticeably longer.
- Check your Age Pension. A lower balance can mean a higher pension. Update Centrelink if your circumstances change.
- Write it down. A one-page plan, made in calm markets, is what stops you selling in a panic.
Try a crash with your own numbers:
🧮Visualise your retirement portfolioEnter your super and the income you need: see your cash buffer, core and satellites, and whether your money lasts.
See how a cash buffer pays your pension, and whether your money lasts, in good years and bad.
Illustration only, general information. Assumes cash earns 4%, the core 7% and satellites 8% a year after fees in normal years, and income rises with inflation at 2.5% a year. “A crash in year 1” assumes the core falls 25% and satellites 35%, then recover over two years; “Two bad years” assumes two falls in a row. Each year your income is paid from the cash buffer; after a good year the buffer is topped back up from your investments, after a bad year it isn’t, so you never sell shares after a fall unless the buffer runs out. Ignores tax and super pension minimums. Age Pension is estimated each year from your balance under the assets and income tests (homeowner rates from 20 September 2026, $50,000 of other assets, limits rising 2.5% a year); your actual entitlement depends on Centrelink. Real returns will be different.
🎥 Watch me explain this
- ▶5:48What should you do when markets fall?Where Does the Money Go When the Market Crashes? · from 5:48 · read the post
- ▶7:39How core and satellite works when markets weakenWhere Does the Money Go When the Market Crashes? · from 7:39 · read the post
▶8:24Should I keep adding to my core, or pause?Live ETF Q&A: China enters a bear market, gold pulls back and cash is king · from 8:24 · see the Q&A notes
3. When it’s two bad years
Sometimes one bad year is followed by another, as in 2000 to 2002 and 2007 to 2009. That’s the real test of a buffer. With two falls in a row, a 2-year buffer is almost empty by the end of year two, and the couple has to sell some shares while prices are still low. A 3-year buffer gets them through without selling.
That’s why we suggest three years if your portfolio pays most of your income, and why trimming spending during a long fall helps: every month of spending you save is a month longer the buffer lasts.
Losses are harder to recover from than they look: a 25% fall needs a 33% gain to get back to even. From when to buy an ETF.
🎥 Watch me explain this
▶7:17Sequence of returns riskHow much do you need to retire in Australia? · from 7:17 · read the post
▶1:57:03“What about a lost decade? My super fell 45% from 2007.”Live ETF Q&A: Tech breaks down as the Aussie market finds its feet · from 1:57:03 · see the Q&A notes
4. The Age Pension cushion
The Age Pension works like a shock absorber. Because it’s means-tested, it rises as your assets fall. For our example couple at 67, a fall that takes their balance from about $903,000 to $680,000 would lift their part pension from about $13,082 to about $30,498 a year (homeowner couple, 20 September 2026 rates). That means less needs to come from the portfolio while it recovers.
Centrelink reassesses market-linked investments regularly, and rates and limits are indexed every 20 March and 20 September. If your balance has fallen a lot, check your entitlement.
5. When to put cash back to work
- The buffer: refill it after the first good year, from whatever has recovered most.
- The satellites: wait for ETFs to build a base and break into an uptrend. Buying too early in a downtrend is how small losses become big ones.
- The market: watch the share of ETFs in an uptrend. When it starts rising and breakouts outnumber breakdowns, the trend is turning back in investors’ favour. Track it on the ETF trend scanner, and see why we only buy in an uptrend.
🎥 Watch me explain this
- ▶1:09:49Was today a change of character, or do we need more confirmation?Live ETF Q&A: Tech breaks down as the Aussie market finds its feet · from 1:09:49 · see the Q&A notes
▶0:24Lesson 1: cash is a position7 ETF investing lessons from 20 years · from 0:24 · read the post- ▶28:33Should we build cash with markets falling?Live ETF Q&A: China enters a bear market, gold pulls back and cash is king · from 28:33 · see the Q&A notes
6. What not to do
- Sell everything and go to cash. You lock in the loss and then have to decide when to get back in, usually after prices have recovered.
- Stop your pension altogether. You still need to take the minimum each year, and the buffer is there to pay it.
- Chase “safe” high yields. High-yield products often fall too, and some are much riskier than they look.
- Refill the buffer after a fall. That’s selling low.
- Check your balance every day. Look at your plan instead.
Our free retirement plan tests a 25% fall in your first year and at 75, lower returns and higher spending, and shows how long your money lasts. Download it as a PDF.
The full system: the retirement cash buffer, how to pay yourself from ETFs, and the Retirement & SMSF hub.
General information only, not personal advice. It doesn’t consider your objectives, financial situation or needs. Examples are illustrations using the assumptions shown, not predictions. Age Pension figures are estimates at 20 September 2026 rates; your entitlement depends on Centrelink’s assessment. Past performance is not a reliable indicator of future performance.
Frequently asked questions
What should retirees do when the share market falls?
Keep paying yourself from your cash buffer, stop refilling it until markets recover, leave your core ETF invested, and let satellite exits move money to cash. Trim discretionary spending if the fall runs long.
Should I sell my ETFs when the market crashes in retirement?
Selling your core after a fall turns a temporary drop into a permanent loss. A cash buffer of two to three years of spending means you don’t have to sell shares to pay your bills.
How long do market falls last?
It varies. Many falls recover within one to three years, but some, like 2000 to 2002 and 2007 to 2009, include two or more bad years in a row. A three-year buffer covers most of them.
Does the Age Pension go up when my super falls?
It can. The Age Pension is means-tested, so a lower balance can mean a higher part pension. For a homeowner couple, each $1,000 less in assessable assets adds about $78 a year under the assets test.
When should I start buying again after a fall?
Refill your buffer after the first good year. For satellites, wait until ETFs build a base and break into an uptrend, rather than buying while they’re still falling.