The stock market heads south just as you've retired, or are about to. It's the worst-case scenario you've always feared. Is it time to scour the help-wanted ads? Do you have to put your post-work life on hold?

The stock market heads south just as you've retired, or are about to. It's the worst-case scenario you've always feared. Is it time to scour the help-wanted ads? Do you have to put your post-work life on hold?

Not if you've taken the time to prepare, financial planners said.

Retirees and would-be retirees should have enough cash on hand to cover expected and some unexpected expenses for a year, and possibly up to three years, said Marjorie Fox, of Fox, Joss & Yankee, a financial planning and investment firm in Reston, Va.

The whole point of the cash cushion is to keep from having to sell assets at the market bottom.

"It's absolutely the worst time to do it," said Mary Malgoire, president of the Family Firm in Bethesda, Md.

If the market downturn is affecting payments from a variable annuity, you may want to consider cutting back temporarily or falling back on cash reserves, Fox said. And falling home values mean that now may not be the time for a reverse mortgage — a loan against your home that is paid back when you die.

Ideally, even retirees and those near retirement should not let volatility drive them out of the equity markets. Brett Hammond, chief investment officer for TIAA-CREF, said his firm's Lifecycle Funds allocate as much as 50 percent of retiree portfolios to stocks, with the rest in fixed-income investments such as bonds.

"There has to be still some element of growth in that retirement plan," said Ambler Cusick, of Smith Barney. "They can't just go to cash or bonds or CDs 100 percent. All those things are strictly securities that pay an income but have ... no real growth prospects."

The challenge is "trying to find a balance between market risk and purchasing power or interest rate risk. You want your money to last," said Judy Redpath, of Vista Wealth Strategies in Reston.

If the Dow's ups and downs compel you to sell, you face an even tougher decision: when to get back in.

Chances are, if you are a cautious investor, you will wait until stocks rebound, but by then you will have missed out on the recovery and will buy high and almost certainly lose money. If you're a retiree, that money is difficult to replace.

Stuart Ritter, a financial planner with T. Rowe Price in Baltimore, said people should not react to market events.

"The consequence of moving money out of the stock market and into cash is that your average return goes down, which means you either need to save more pre-retirement or you need to spend less if you are in retirement. If you're worried about the stock market doing poorly, your response should be to save more," he said.

One way to preserve cash is to cut down on expenses.

"I wouldn't take a vacation around the world right now," said Alexandra Armstrong, of Armstrong, Fleming & Moore in Washington.

For those thinking about retiring in the next few years, it isn't too late to work out a plan. After all, figuring out how much money you will need in retirement is a complex calculation that depends on how much you've saved, whether you have a pension or an annuity, the value of your home, and your lifestyle.

"Situations like this highlight the need to plan ahead," Malgoire said. "So if you're planning to retire in the next few years ... you should be reorganizing your portfolio in such a way so you can cope with downdrafts. This is not the end of the world. It is a downdraft. They happen occasionally."