When the tech and real estate bubbles burst, many of my friends lost 40-50% of their retirement portfolios almost overnight. Whether you’re at the tail end of the baby boomer generation or already retired, lopping 40-50%—or more—off the value of your nest egg would be catastrophic. Which begs the question: is a similar downturn looming? Take a look at the chart below showing the S&P’s performance since 2008.

Friends, caution is in order. We may see a major correction, a huge downturn, or this bubble could continue to grow for quite some time. I’ll leave the timing predictions to others. As investors, we have to deal with the here and now, with a cautious eye on what might happen down the road.

Don’t Fool Yourself

One of our major concerns at Miller’s Money is investor euphoria. Investors—even those playing with retirement money—often ignore warning signs, thinking the parabolic rise in stock prices is never going to end. However, this time is NOT different.

Look at the Nasdaq’s performance just before the tech bubble crash:

From March of 1999 to March of 2000, the Nasdaq doubled, and investors were euphoric. Are you feeling that euphoria today?

Of course, for retirement investors there’s one key difference between the run-up shown in the chart above and what’s happening now: the Federal Reserve’s low-interest-rate policy has forced them into the market. As one frustrated retiree said to me, “Where else can we go? I rely on my nest egg to help me pay my bills.” My response: we have to make hay under the storm clouds and protect ourselves from the eventual storm—whenever it might come.

Don’t Let the Next Storm Make You Poor

The goal for a retirement portfolio is to create enough of an income stream that, along with other supplement sources such as a pension or Social Security, you can maintain your current lifestyle over the long haul while the balance grows ahead of inflation. This portfolio should also include enough safety measures to keep you whole regardless of what the market does.