What To Do When the Market Goes Down

Jeremy Keil explores 3 options investors can evaluate in the event of a market downturn.

Market downturns can be unsettling—especially if you’re nearing or in retirement. You’ve spent decades building up your nest egg, and when you see the stock market drop, your gut reaction might be to hit the brakes, make changes, or even move everything to cash. But before you do, let’s talk about three ways you can potentially take advantage of a down market and turn volatility into opportunity.

1. Use Tax Loss Harvesting to Your Advantage

If you’ve got money in a non-IRA investment account—sometimes called a brokerage or taxable account—then tax loss harvesting is a powerful strategy to consider.

Here’s how it works: if your investments have gone down in value, you can sell them at a loss and use that loss to offset gains elsewhere in your portfolio or even offset up to $3,000 of ordinary income on your tax return. You stay invested by replacing the sold investment with something “similar but different.” That helps you avoid what’s called the 30-day wash sale rule, which disallows the loss if you buy back the same or a “substantially identical” investment within 30 days.

Let’s say you own Coca-Cola and it’s down. You sell it and buy Pepsi, which is a similar stock profile that has a higher likelihood of reacting to the market as your previously held Coca-Cola stock. Or if you have an S&P 500 index fund, you could sell that and buy a fund that tracks the Russell 1000^®. They’re different funds, but historically they’ve moved in similar patterns.

This strategy lets you take the tax benefit now without giving up your exposure to the market.

2. Consider a Roth Conversion While Prices Are Down

Another overlooked opportunity during a market decline is the Roth conversion. Let’s say you had $100,000 in a traditional IRA, and now that account is worth $90,000 because of the market drop. If you convert that account to a Roth IRA now, you’ll pay taxes on the $90,000 instead of the original $100,000.

Then, when the market recovers, all of that growth will be inside the Roth and come out tax-free later on.

That’s a win-win: you reduce the tax cost of the conversion, and future gains grow in a tax-free account. Just make sure to talk to your tax advisor about how a conversion fits into your overall tax picture, especially if you’re near Medicare age or dealing with IRMAA thresholds.

3. Reevaluate Your Risk and Rebalance Your Portfolio

A market downturn is a great time to ask, “Do I have the right amount of risk in my portfolio?”

If your portfolio started with 60% in stocks and 40% in bonds, a drop in the stock market might have shifted that balance to something like 55/45 or 50/50. Rebalancing helps bring it back to your target—meaning you might sell some bonds (which held their value better) and buy more stocks while they’re down.

But there’s a second part to this: maybe you realize you had the wrong level of risk to begin with. Maybe you thought you were a conservative investor, but now your portfolio’s losses are keeping you up at night. It’s okay to reassess.

I once met with someone who told me she’d wait to adjust her investments until the market came back. But by the time she checked in again, her portfolio had lost 90%—because she was way overexposed and didn’t know it.

Don’t let that be you. Make sure your portfolio matches your risk tolerance, your timeline, and your income needs.

The Big Picture

It’s April 2025 as I write this, and yes—the S&P 500 is down about 11% from its recent highs. But go back just one year, and the market is still up about 7% since April 2024. That’s the power of perspective.

Market drops feel painful, but they also offer chances to make strategic moves. With tax loss harvesting, Roth conversions, and rebalancing, you have options that may help you not just survive a market downturn, but potentially strengthen your retirement plan for the long run.

Disclosures

Hypothetical examples are for illustrative purposes only.  May not be representative of actual results.

Index Benchmarks presented within this report may not reflect factors relevant for your portfolio or your unique risks, goals or investment objectives. Past performance of an index is not an indication or guarantee of future results. It is not possible to invest directly in an index.

The Standard & Poor’s 500 (S&P 500) is a market-cap weighted index comprised of the common stocks of 500 leading companies in leading industries of the U.S. economy.

The Russell 1000^® Index represents the top 1000 companies by market capitalization in the United States.

You cannot invest directly in an index.

State tax rules may differ from federal rules governing the tax treatment of Roth Conversions and there may be conflicts between federal and state tax treatment of IRA conversions.  Consult your tax professional for your state’s tax rules.

Jeremy Keil, aka “Mr. Retirement” and Keil Financial Partners offer retirement planning services with a focus on retirement income and tax planning, Social Security and pension claiming decisions, health & life insurance analysis and estate planning strategies. Jeremy Keil and Keil Financial Partners using the trademark name “Mr. Retirement” recognizes that these are not an exhaustive list of all aspects of retirement but are important topics on the financial aspects of retirement planning.  The projections or other information generated regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results. Thrivent Advisor Network, LLC and its advisors do not provide legal, accounting or tax advice. Consult your attorney and/or tax professional regarding these situations.

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Thrivent and its financial professionals do not provide legal, accounting, or tax advice. Consult your attorney or tax professional. Representatives have general knowledge of the Social Security tenets. For complete details on your situation, contact the Social Security Administration. Before investing, investors should carefully read the prospectus/summary prospectus. and carefully consider the investment objectives, risks, charges and expenses. All portfolio-level performance shown is hypothetical and for illustrative purposes only. Investor returns will differ from the results shown. The investment funds listed herein are not FDIC insured and shouldn’t be seen as a substitute for money market funds. Increases in interest rates can cause the prices of bonds in the portfolio, and thus. the fund’s share price, to decrease. All distribution yields shown are after all fund related expenses, but before ’s management fee.