Three Things To Do During a Market Downturn
Often, not much is heard about the markets when they’re doing well. Life goes on as usual, and you have a sense of security that your financial future is in good hands.
But when the market goes down, people tend to panic. That’s a natural reaction when you see your savings decline right in front of your eyes. Having second thoughts about how you could have allocated your money is common, but what can you do about it now?
First, take a deep breath. You do have resources in your corner to help stabilize retirement income avenues. No matter how much of your portfolio is tied to the market’s performance, below are three things you should consider doing when the market is declining.
1. Coping with the Coronavirus Market
How much of your 401(k) or other retirement account is affected by a market downturn? If your stomach sank along with the stock market, you probably have too much risk in certain investments. If you’re 20 or 30 years out from retirement, chances are you can afford more risk. But the closer you are to retirement, you want more conservative investments to reduce your risk exposure. There are ways of investing that mitigate drops in the market. One safeguard is to change your investment approach; the closer you are to retirement age. A risk exposure review will give you clarity on whether now might be a good time to make some adjustments or stay the course.
2. How to Get the Most Retirement Income
A retirement analysis is nothing more than an analysis of the different sources of income you plan to use in retirement, which might include a 401(K), personal savings, Social Security or even a pension. With everything laid out on the table, this will help you think through strategic ways to make your money last as long as you live.
3. A Holistic Plan is Whole
You deserve a great retirement, and that starts with a plan. Rather than your typical financial plan, a holistic financial plan prepares you for retirement by examining the various elements that make up your financial house, not only investment accounts but mortgages, tax strategies, medical expenses, strategic vs. tactical approaches to investing, proper diversification, saving for a child’s college education and estate planning.
If you are 10 years or further from retirement, more than likely you should do nothing other than look for opportunities. Being comfortable with risk and having an income plan that can endure that level of risk are two very different things. Now may be a great time to consider increasing your contributions, complete a Roth conversion (consult with your CPA), and look for tax loss harvesting opportunities (consult with your CPA). However, if you are within 10 years of retirement, an extended market downturn may have catastrophic effects on your ability to retire or enjoy your retirement. Developing a sound financial strategy that is designed to hold up regardless of what happens in the markets is critical to your financial future.
Kristian Finfrock is the founder of Retirement Income Strategies. His team specializes in working with families that are at or near retirement. After reviewing one’s current financial plan, they help clients identify potential problems, make recommendations to mitigate risks and then build a customized comprehensive retirement income strategy to help clients get the most out of their retirement.
Securities offered through Kalos Capital, Inc. and Investment Advisory Services offered through Kalos Management, Inc., both at 11525 Park Woods Circle, Alpharetta, GA 30005, (678) 356-1100. Retirement Income Strategies is not an affiliate or subsidiary of Kalos Capital, Inc. or Kalos Management, Inc.
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