The next bear market will arrive. It is difficult to know when. It is difficult to know what will trigger it or how deep it will go. What we do know — from every market cycle in modern history — is that the families who come through it well aren't always the ones who predicted it. They're the ones who prepared for it while they didn't need to.
Here's what that preparation actually looks like for affluent families with significant portfolios.
They Define What "Enough Liquidity" Means Before They Need It
The first question a bear market asks of a retiree is: where does your income come from when the portfolio is falling? Families who haven't answered that question in advance tend to answer it reactively — and reactive answers in a declining market usually mean selling equities at depressed prices.
Affluent families who prepare well tend to define their liquidity structure while markets are strong. One to two years in cash and money market equivalents. Another layer in short-duration bonds. A clear plan for how that buffer gets replenished when/if markets recover. Having that structure in place before a decline means near-term income is never dependent on what the stock market did last week. For a detailed look at how to think through that liquidity structure, this piece on how much cash retirees should keep covers the full framework including the behavioral dimension.
They Stress-Test the Income Plan Against Real Drawdown Scenarios
There's a meaningful difference between knowing your portfolio could decline 30% in a bear market and understanding specifically what that means for your income, your spending, and your plan. Affluent families who prepare well tend to have actually run those numbers — what does a 25% decline mean for our withdrawal rate? What does a 40% decline mean? At what point does the plan need to adjust, and what would that adjustment look like?
This kind of stress testing isn't designed to produce anxiety. It's designed to replace it with clarity. A family that has already worked through the scenarios tends to respond to a real decline very differently from one that hasn't — because they already know what their threshold for action is and what that action would be. For context on what bear markets have historically looked like and how portfolios have recovered, this piece on what happens to a $5M portfolio in a bear market provides the historical framing.
They Manage Concentration Risk While Prices Are High
Bear markets have a way of exposing concentrated positions that seemed manageable during a bull market. A stock that was 20% of the portfolio when things were going well can become 30% or 35% after a broad decline, even if the position itself didn't move — because everything else fell around it. And a concentrated position in a company that's directly affected by the downturn's catalyst can fall far more than the broader market.
Affluent families who prepare well typically address concentrated positions before markets turn — not all at once, but with a deliberate staged diversification strategy that spreads the tax cost over multiple years. The time to begin that conversation is when the position is at its most valuable and the tax cost of acting is most manageable, not after it's fallen and the opportunity has narrowed. For a look at what happens when concentration risk materializes without a plan, these real examples of overconcentrated portfolio outcomes provide the historical context.
They Set Up the Tax-Loss Harvesting Framework in Advance
Tax-loss harvesting — selling positions at a loss to realize losses for tax purposes while maintaining market exposure in a similar holding — is one of the few genuine financial silver linings of a market decline. But it requires being positioned to act during the decline, not after it. That means having the right account structure, understanding which positions have embedded losses worth harvesting, and potentially having an advisor who's actively managing the portfolio with that objective in real time.
For families with significant taxable accounts, a well-executed tax-loss harvesting strategy during a bear market can generate six figures in losses that carry forward to offset future gains. That's a tangible benefit that requires preparation — it doesn't happen automatically. For a plain-English explanation of how the strategy works, this overview of tax-loss harvesting covers the mechanics clearly.
They Write Down the Investment Policy Before Emotions Run High
One of the most consistent differences between affluent families who navigate bear markets well and those who don't is whether they have a written investment policy statement — a clear, agreed-upon document that defines target allocation, rebalancing triggers, and the conditions under which the plan would or wouldn't change.
This matters because a bear market is one of the worst times to make investment policy decisions. Fear is running high, the news is alarming, and every instinct points toward doing something. Having a written policy that was agreed upon when things were calm creates a counterweight to that pressure — a document that says "this is what we decided we would do, and these conditions haven't changed." Advisors who help clients create and maintain these documents tend to produce better behavioral outcomes than those who manage portfolios without them.
They Have the Conversation With Their Advisor Now
The most important thing affluent families can do to prepare for the next bear market is the simplest: they have a direct conversation with their advisor while markets are strong. What does a significant decline mean for my income plan? What would we do? What wouldn't we do? What triggers a change versus what's just noise we should ignore?
These conversations take an hour. They tend to produce clarity that holds up under pressure in ways that good intentions alone don't. And they're the kind of planning that distinguishes a genuine advisory relationship from a portfolio management service. For a broader look at the risks that tend to surprise retirees most — including the behavioral ones — this piece on protecting retirement from unexpected risks covers the full picture.
The Bottom Line
Bear market preparation isn't about predicting the next downturn. It's about building a portfolio structure, an income plan, and an advisory relationship strong enough that the next downturn — whenever it arrives — doesn't require you to make important financial decisions under duress. The families who do that work in advance tend to experience bear markets very differently from those who don't. Not because they're insulated from the decline, but because they already know what they're doing and why.
If you'd like to have that conversation and work to ensure your plan is genuinely prepared, we'd welcome the opportunity.
The best bear market strategy is the one you put in place before one arrives. We work with affluent families throughout the St. Louis area to build the income structures, tax strategies, and investment disciplines that can hold up when markets don't.
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John Wahl is a CFP® and ChFC®, co-founder of One Bridge Wealth Management, and was named to the Forbes 2025 Best-In-State Next-Gen Wealth Advisors list. One Bridge is a fee-based independent wealth advisory practice serving high-net-worth families in the St. Louis area. One Bridge Wealth Management acts as a fiduciary when managing assets.
2025 Forbes Top Next-Gen Wealth Advisors, created by SHOOK Research. Presented in Aug 2025; based on 03/31/25 data. Advisors pay a fee to hold out marketing materials. Not indicative of advisor's future performance. Your experience may vary.
This content is for informational purposes only and does not constitute personalized tax or investment advice. Please consult a qualified tax professional regarding your specific situation.