Market Volatility: A Wake-Up Call for Retirement Savers
The recent stock market plunge serves as a stark reminder that economic news can be unpredictable and unsettling. However, it’s essential to maintain a long-term perspective when it comes to retirement planning.
Focus on What You Can Control
Laura LaTourette, a certified financial planner, emphasizes the importance of staying focused on expenses, savings, and goals. “We all stay focused on what we can control…and to continue to focus on [our] goals.” This approach helps to mitigate the impact of market fluctuations on your retirement strategy.
Avoid Rash Decisions
Building wealth is a long-term process, and it’s crucial to avoid making impulsive decisions based on short-term market volatility. Ryan Haiss, a certified financial planner, advises clients to remember that market fluctuations are a natural part of investing. “If you get out when markets dip, you might very well miss out on the upside when they get rolling again.”
Stay Invested, But Be Mindful of Risk
Even those close to retirement or already retired should maintain some level of investment in stocks to benefit from the potential upside over time. However, it’s essential to be aware of market risk and adjust your asset allocation accordingly. Justin Smith, a certified financial planner, recommends focusing on what you can control, such as your retirement plan and cash holdings, and acknowledging that much of this is out of your control.
Automate Your Investments
If you’re setting money aside automatically in your employer-sponsored retirement plan or making automatic contributions to a Roth IRA or traditional IRA, take a deep breath. You’re constantly investing in your retirement accounts when the market is soaring and when it’s down, which means the return on your investments evens out over the long run.
Target-Date Retirement Funds: A Simple Solution
Target-date retirement funds can provide a straightforward way to manage your investments. These funds automatically adjust your asset allocation based on your target retirement date, shifting to a more conservative blend as the date approaches.
Rebalance and Refine Your Portfolio
For those closer to retirement age, it’s essential to rebalance and refine your portfolio to ensure it remains aligned with your goals and risk tolerance. Christine Benz, Morningstar’s director of personal finance, recommends holding five to 10 years’ worth of anticipated portfolio withdrawals in a combination of cash and high-quality bonds.
Regularly Review and Adjust
Regularly reviewing and adjusting your retirement account investments can help you stay on track and avoid feeling anxious when markets fluctuate. Consider meeting with a financial planner throughout the year to review allocations and revisit your overall retirement outlook and risk tolerance.
Take Control of Your Retirement
While market volatility can be unsettling, it’s essential to focus on what you can control. By maintaining a long-term perspective, avoiding rash decisions, and regularly reviewing and adjusting your portfolio, you can ensure a more secure retirement.
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