Most of us remember fire drills from elementary school.

The alarm would sound, and without thinking too hard, we’d line up, walk calmly to the exit, and gather outside. No panic. No chaos. Just a practiced response to a stressful situation, because someone had the foresight to prepare us before the emergency happened.

That preparation had a purpose beyond the drill itself. It built muscle memory. It taught us not just what to do in a crisis, but equally important, what not to do. Don’t run. Don’t freeze. Don’t go back for your things.

The same concept applies directly to investing, and for pre-retirees and retirees in Pasadena, it may be one of the most valuable frameworks you can internalize before the next market downturn arrives.

Market Downturns Are Not the Exception. They’re Part of the Plan.

Here’s a statistic worth sitting with: U.S. stocks have experienced downturns of more than 20% in 29 of the 98 calendar years since 1927.

That’s nearly one in three years. The odds are high that as a long-term investor, you will be tested by a significant market decline at some point during your retirement, or on the road to it.

Knowing this isn’t meant to frighten you. It’s meant to prepare you. Because the investors who fare best during downturns aren’t the ones who react the fastest. They’re the ones who knew what to expect and had a practiced response ready.

A Bad Stretch Doesn’t Mean a Bad Year

This is one of the most important and most misunderstood realities of investing, and the data tells a compelling story.

While a greater-than-20% decline occurred 29 times over that 98-year period, only six of those years ended with the market down 20% or more. In ten of those 29 instances of significant decline, the market actually posted positive full-year returns.

Read that again: markets finished the year in positive territory in ten of the 29 years that included a significant drawdown at some point.

This matters enormously for investors who panic-sell during a downturn. By locking in losses and stepping out of the market, they miss the recovery, which is often the most powerful part of the cycle. The temporary decline becomes a permanent loss, not because the market failed them, but because fear did.

The Problem with Reacting

When the alarm goes off in a building, we don’t run toward the fire to assess its severity. We don’t freeze at our desks, hoping it will stop. We exit calmly, because we’ve practiced.

Market volatility triggers the same primal response that fire alarms do: urgency, fear, and the impulse to do something. For investors, that impulse often translates into selling, getting out in hopes of avoiding further loss.

The problem is that this reaction compounds the damage. You can’t control when markets rise or fall. What you can control is whether you make a bad situation worse by responding emotionally rather than strategically.

After more than 35 years of helping families in the Pasadena area navigate their retirement finances, I’ve seen this play out many times. The investors who stay the course, who have a plan, understand what market downturns look like historically, and have practiced their response in advance, consistently come out in a better position than those who let fear drive their decisions.

What a Financial Fire Drill Actually Looks Like

So what does it mean to run a financial fire drill before the alarm goes off?

Know your plan before you need it. A well-constructed retirement plan accounts for market volatility; it doesn’t pretend the market only goes up. Your investment strategy should be designed so that a significant short-term decline doesn’t force you to sell assets at the worst possible time to meet living expenses.

Understand your risk tolerance honestly. There’s a difference between the risk tolerance you think you have when markets are calm and the one you actually have when your portfolio drops 15% in a month. A financial fire drill asks you to think through that scenario in advance: How would I feel? What would I be tempted to do? What’s my practiced response?

Have cash reserves that give you time to act. One of the most effective buffers against reactive decision-making is simply not needing to sell during a downturn. Maintaining appropriate liquid reserves means a market decline doesn’t force your hand; you have the runway to wait for recovery.

Remember the historical context. When markets decline sharply, it can feel permanent. The data tells a different story. Markets have recovered from every downturn in history. Keeping that perspective in view, especially when the financial news is loudest, is a key part of staying the course.

Work with an advisor who helps you stay disciplined. One of the most valuable things a good financial planner does isn’t pick investments. It helps you avoid costly mistakes when fear is loudest. Having a trusted, independent voice in those moments is worth more than most investors realize.

The Bottom Line

Fire drills save lives because they replace panic with a practiced, calm response. Financial fire drills serve the same purpose; they help you know what to expect, how to respond, and most importantly, what not to do when markets test your resolve.

The most reliable course of action after a market downturn is to remain invested. That’s not blind optimism. It’s what nearly a century of market history consistently reinforces.

At Mission Street Wealth, we help pre-retirees and retirees in Pasadena and throughout the Greater Los Angeles area build retirement plans designed to weather market volatility, and we help you prepare mentally and financially so that when the alarm sounds, you already know what to do.

If you’d like to talk through your plan and run your own financial fire drill, we’d be glad to have that conversation.