Market Volatility: A Wake-Up Call for Retirement Savers
The recent stock market downturn has left many investors reeling. But for those saving for retirement, it’s essential to keep a level head and focus on the long game.
Don’t Let Emotions Cloud Your Judgment
When the market takes a hit, it’s natural to feel anxious. However, making rash decisions based on short-term market fluctuations can be detrimental to your retirement strategy. As Laura LaTourette, a certified financial planner, notes, “We all stay focused on what we can control like expenses and savings … and to continue to focus on [our] goals.”
Stay Calm and Carry On
Experts agree that staying invested in stocks, even in retirement, is crucial for long-term growth. Justin Smith, a certified financial planner, advises clients to “focus on what we can control, such as their retirement plan and cash holdings, and acknowledge that much of this is out of our control.” By doing so, you’ll be better equipped to ride out market ups and downs.
Automate Your Investments
If you’re setting aside money automatically in your employer-sponsored retirement plan or individual retirement account (IRA), take comfort in knowing that you’re investing consistently, regardless of market conditions. This approach helps to even out returns over the long run.
Target-Date Retirement Funds: A Simple Solution
For those who prefer a hands-off approach, target-date retirement funds can be an attractive option. These funds automatically adjust their asset allocation based on your target retirement date, ensuring that your investments remain aligned with your goals.
Rebalancing: A Crucial Step
While it’s essential to stay calm, it’s equally important to review and rebalance your portfolio periodically. Christine Benz, Morningstar’s director of personal finance, suggests that pre-retirees and retirees should hold five to 10 years’ worth of anticipated portfolio withdrawals in a combination of cash and high-quality bonds. This approach provides a buffer against market downturns.
Fine-Tune Your Portfolio
If you’re feeling anxious about market volatility, now is an opportune time to reassess your portfolio allocation. Consider paring back your stock holdings if they’re making you uncomfortable. Ryan Haiss, a certified financial planner, advises clients to “revisit your portfolio allocation” and make adjustments as needed.
Regular Check-Ins with Your Adviser
Finally, regular meetings with your financial adviser can help you stay on track and make informed decisions about your retirement strategy. By reviewing your allocations and risk tolerance regularly, you’ll be better equipped to navigate market ups and downs with confidence.
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