Current market conditions could forecast a treacherous future for you if you’re heading into retirement. Is this the worst time to retire in the past 10 years? I think probably so. If you look at the current conditions, stocks, under any measurement, are historically very expensive.

Two of the most reliable ways to measure stocks include looking at (1) the cyclically adjusted price-to-earnings ratio (commonly referred to as the CAPE ratio) and (2) total stock market capitalization to GDP ratio. I won’t get into all of the details right now, but these are probably two of the most accurate ways, at least historically, to predict how expensive stocks are and what that means for the next 10 years in the markets.

When you’re moving into retirement, you’re now going into a spending phase. Up until this point in your life, you’ve been saving your money, and now you’re going to be spending your money. A big deal that comes up at this time is when are the good years in the markets and when are the bad years in the market. If you retire at 65, you might live for another 30 years. And over those 30 years, the markets will probably average great returns, but what happens in the early years?

Then, we’ve got the bond market. Bonds are extremely expensive. The 10-year Treasury yield is currently around 3 percent. The historic average since 1870 is 4.6 percent. In other words, we are at historically low interest rates. What does that mean? That means bonds are also expensive.

We have never in our U.S. history had a period of time where both stocks and bonds were expensive like this. So, if you’re going to retire in the next 5 years, what does that mean for you? Believe it or not, if you live for 30 years in your retirement, your eventual outcome financially over those 30 years – 50 percent of it is determined in the first 5 years. And 80 percent of your eventual outcome in retirement is determined in the first 10 years of your retirement.

What if those first 5 years don’t look so hot in the markets? Not looking so good over 10 years doesn’t mean that the market is down 50 percent over 10 years. It means that maybe it’s flat, or maybe it’s up 2 or 3 percent. That would be bad performance over a decade. If that happens, how will your financial plan be impacted? You have to have ways in this market to mitigate the risks of retiring and then having a bear market or having a bad run in the next decade.

What if you’re going to retire in the next 4 years and then in 3 years we have a recession and a bear market? In a bear market, market losses around 40 percent are kind of average. If that happens, are you going to feel like you can still retire? Not if you haven’t secured your income in the early years of retirement. The great news is that if you are 5 years or more from retirement, or especially 10 years from retirement, there are things you can do today to secure income. But if you’re 5 years or closer to retirement, or if you’re just retired, you need to take steps to mitigate the risks of a bad market in the coming decade that doesn’t go very far and is largely sideways.

There are different ways that you can do this – you can do it with your income plan, you can do that in how you structure your investments, you can even do that with a budget that is flexible (if you’ve got a pretty good bit of discretionary spending in your budget) so that as your assets decline, you change the amount that you are spending. There are different ways that are scientifically proven to work to mitigate the risk of retiring in a bear market. But if you’re just kind of happening along and you’ve got that traditional mix of 60/40 (or even 70/30) of stocks and bonds, I’m afraid you may not be prepared for the coming decade of market conditions if you are at or near retirement.