Before selling in a downturn, review spending needs, accessible cash and taxes. See how flexible expenses can change the amount you must sell.
March 16, 2026 · Financial Forte Staff
Historical article: prepared retrospectively using information available as of March 16, 2026.
Selling investments during a downturn can feel like admitting defeat. For someone drawing retirement income, however, a sale may be part of an ordinary spending plan. The challenge is deciding what to sell, how much to raise and whether the spending plan itself needs attention.
Begin with the cash need rather than a prediction about the market's next move. Review reliable income, accessible reserves, expenses that can change and the portfolio's remaining risk. A downturn deserves a practical response, but it does not make the same response right for every retiree.
Identify the amount that must come from investments
Separate essential recurring bills from planned purchases and discretionary spending. Then subtract the pension, Social Security or other income available for those expenses. The resulting gap is more useful than starting with a withdrawal percentage chosen in isolation.
Remember that gross withdrawals may differ from spendable cash because of taxes or withholding. Also identify expenses already assigned to a cash reserve. A balance earmarked for a tax payment cannot simultaneously cover next year's travel without another funding source.
The account used matters. Selling in a taxable account can realize gains or losses; withdrawing from a retirement account can have different tax consequences. Required distributions and restrictions may limit flexibility. Review the actual account rules before treating every holding as an interchangeable source of cash. [1]
A portfolio's decline can also reveal a risk mismatch. If near-term spending depended entirely on volatile assets, the plan may need a broader adjustment than choosing this month's sale. That review should connect the allocation with the time horizon and the household's capacity to absorb losses. [2]
Compare spending choices in dollars
Frank and Jo are a hypothetical retired couple reviewing a withdrawal. Their annual spending plan requires $30,000 from investments after their other income. Their portfolio was $800,000 and is now $680,000 following a hypothetical 15% decline. This example does not describe an actual market event.
The planned $30,000 withdrawal was 3.75% of the starting balance. It is about 4.41% of the lower balance ($30,000 divided by $680,000). Neither percentage alone establishes whether the plan is sustainable; the comparison shows that an unchanged dollar withdrawal represents a larger share of the remaining assets.
The couple has $30,000 of cash within the current portfolio, but $4,000 is committed to a separate tax payment. Only $26,000 is available for the planned spending gap. Funding the full $30,000 gap therefore requires another $4,000 beyond that available cash, before preserving any additional cushion.
Their spending plan includes a $5,000 optional trip. If they defer it, the portfolio-funded need falls to $25,000, leaving $1,000 of the available cash. They may decide that keeping the trip matters enough to arrange a sale instead. The calculation makes the choice explicit rather than treating all spending as either untouchable or expendable.
Ignoring subsequent returns, fees and the separately reserved tax payment, a $30,000 withdrawal would reduce $680,000 to $650,000; a $25,000 withdrawal would leave $655,000. The $5,000 difference remains invested or available. It does not guarantee recovery or eliminate the need to review future withdrawals.
Choose the funding source deliberately
If a sale is needed, review the whole allocation. Some holdings may now be above their intended weight, while others may have fallen substantially. The lowest recent return is not, by itself, a reason to sell or a reason to hold indefinitely. [2]
Tax basis, transaction costs and account location can affect which sale is appropriate. A taxable loss may have value, but wash-sale rules and other details can alter the treatment. Raising cash and implementing a tax strategy should be coordinated rather than pursued as unrelated actions. [1]
A reserve can reduce the need to sell immediately, but it is finite. Spending it without a refill plan can merely move the difficult decision into a later month. Identify the account, timing and tax review needed to decide how the reserve will be replenished and what would prompt an earlier review.
Organizing investments by near-, intermediate- and long-term purposes can make the plan easier to understand. Those labels do not change the underlying investments' risks, and a “bucket” strategy does not remove the consequences of poor returns or excessive withdrawals. The allocation and withdrawal policy still need to work together. [2]
Set review points instead of a market deadline
Frank and Jo can choose a date to revisit spending and reserves, record who will initiate it, and choose a trigger for an earlier discussion if a large unexpected expense arises. A rule such as “we will wait until the market gets back to its high” depends on an outcome and timing no one can promise.
If a required distribution applies, confirm the amount, timing and eligible accounts separately. Reducing discretionary spending does not necessarily remove a distribution obligation, although a distribution need not always be spent. [1]
Avoid turning a temporary spending review into a judgment about whether retirement has failed. A good plan should allow choices when circumstances change. The useful next step is a short comparison of the current withdrawal need, a reduced-spending alternative and the account-level consequences of each. That gives the household a decision it can make with the information available today.
Related reading
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Educational information, not personalized investment, tax, legal or benefits advice. Examples use hypothetical assumptions. Verify current rules and your circumstances before acting.
