Retirement / The Compound Effect
We Knew This Was Coming
| 5 min | By Heath J. Harris
The market just did exactly what it always does. The people who panicked missed it. Here's why the ones sitting on their hands are the ones winning.
Six months ago, the headlines read like a countdown to disaster.
A widening war in the Middle East. Tariff fights with Europe and China pushing oil past $95 a barrel. A central bank in Japan tightening for the first time in a generation. An AI capex cycle that half of Wall Street called a bubble and the other half called the beginning of the biggest productivity boom in fifty years.
If you were watching cable news, you were supposed to sell. If you were reading your advisor's weekly note, you were supposed to "reduce exposure." If you were listening to the loudest voices on X, you were supposed to short everything and buy gold.
Here's what actually happened: the market went up.
Not a little. A lot. The S&P 500 is up double digits from its February lows. The companies people were told to sell are at new all-time highs. The "unserviceable" U.S. debt load hasn't broken anything. The Middle East hasn't ended the world. Oil is back under $80. And the people who sold in the panic are now the ones asking their advisors when it's safe to get back in.
I'm not going to pretend I knew exactly how this would play out. Nobody did. But I'll tell you what I've been saying in client meetings all year, and what I said six months ago when the fear was thickest: this is what markets do. They climb a wall of worry. They punish the confident. They reward the patient.
The only thing that matters
If you're 55 or older — which describes most of the people I work with — your financial life is not a trading problem. It's a sequence problem.
The sequence of returns you earn in the first ten years of retirement determines more about your long-term wealth than almost anything else. Not your rate of return. Not your stock-picking. Not whether you timed the bottom perfectly. The sequence.
Which means the single worst thing you can do — the thing that actually breaks retirements — is sell into a drawdown.
Every time I've seen someone blow up their retirement plan, it's been the same story. They watched the news. They got scared. They moved to cash. Then they watched the market recover without them, told themselves it would come back down, and never got back in at a price they liked. Ten years later they're still "waiting for the right moment."
The right moment was when they sold. The right moment is almost always when you're scared.
What to do when people are fearful
I don't mean this as a platitude. Warren Buffett's line about being greedy when others are fearful is true, but it's useless without a system. Here's the system I run with clients:
- Don't sell. If you're in a plan, stay in the plan. If you don't have a plan, this isn't the moment to make one under duress.
- Rebalance, don't reposition. If stocks are down and bonds held up, your allocation drifted toward bonds. Bring it back to target. That's not market timing — it's discipline. You're selling what held up to buy what didn't. Mechanically.
- Harvest losses aggressively. If you have taxable accounts and anything is down, sell it, immediately buy a similar-but-not-identical replacement, and bank the loss against future gains. Direct indexing makes this ten times more powerful because you can do it at the individual stock level, not just the fund level. I'll write more on this soon — it's probably the single most underused tool in retirement planning.
- Convert to Roth on weak days. When the market drops 5%, your Roth conversion just got 5% cheaper. You're moving the same shares into a tax-free bucket at a lower valuation. If you believe the market recovers (and history is pretty insistent on this), you want that recovery happening in your Roth.
- Check your withdrawal rate, not your balance. If you're retired, the question that matters isn't "how much did my portfolio drop?" It's "can I still afford my life at the new number?" Usually the answer is yes and nothing needs to change. Sometimes it's no, and you adjust the spending — not the portfolio.
The honest part
I can't tell you the market won't drop 20% next month. It might. I also can't tell you it will recover in a month, a year, or five years. What I can tell you is that every serious study of retirement outcomes says the same thing: the people who stay invested through the fear do dramatically better than the people who try to avoid it.
That doesn't mean you stay exposed if you shouldn't be exposed. If you're 65, retired, and 90% in stocks, you had the wrong allocation before the fear started. That's not a "market timing" problem — that's a "wrong plan" problem. Get the plan right, then let the plan do the work.
The people who made real money over the last six months weren't the traders. They were the retirees who had a plan, trusted it, and did the boring things when the news said to do the exciting ones.
That's the whole game.
If you want to look at your plan through the current lens — what your withdrawal sequence actually looks like, whether your Roth conversion window is still open, whether you're sitting on harvest-able losses you haven't captured — we can do that together. Book a complimentary Retirement Clarity Assessment →
We knew this was coming. The next one too. The one after that also.
Stay invested. Stay disciplined. Buy when people are fearful.
That's it.
— Heath