Preparing Your Retirement Plan for Market Ups and Downs

Market fluctuations are an inevitable part of the economic landscape, but when it comes to your retirement, the timing of a market decline can be just as crucial—if not more—than the magnitude of the drop. Volatility becomes especially concerning when your retirement funds are riding high at multi-year peaks.

Recent years have seen significant market volatility, causing many retirement plans to falter or lose momentum. So, how can you shield your retirement plan in the event of a downturn?

Ways to Safeguard Your Investments

Market volatility can determine whether you enjoy a comfortable retirement or struggle to make ends meet. Experiencing a market downturn early in retirement can be particularly dire to your overall plan. Given that bear markets tend to occur approximately every 3.5 years, there’s a significant likelihood you could face a downturn in the early stages of retirement. While the strategies outlined below won’t completely eliminate losses, they may help cushion the impact of the market’s inevitable ups and downs.

Remain Composed

It’s natural to feel emotional when market fluctuations impact your finances. However, sticking to your investment strategy and resisting impulsive decisions during turbulent times can help you avoid making matters worse. By following a well-structured financial plan and regularly rebalancing your portfolio, you’re positioning yourself for long-term success. Shielding your principal should always be your top priority, so don’t take unnecessary risks with your investments when the market is down.

Prioritize Diversification and Rebalancing

No doubt we’ve all heard how crucial diversification is for optimizing our investments. However, as you near retirement, it becomes even more essential to focus on the right types of assets. This is the time to lower your risk and fine-tune your asset allocation, so you can reduce the negative effects of any single underperforming investment on your overall portfolio.

Rebalancing is equally important in keeping your portfolio stable. Simply diversifying isn’t enough—you need to regularly review your portfolio to align it with your risk tolerance and to prevent it from being overly dependent on one asset class.

Build an Emergency Fund

This strategy focuses on a conservative approach. While cash investments may offer limited growth, maintaining a cash reserve with at least one year’s worth of living expenses means you don’t need to sell investments at a loss to access funds. Review your spending habits and look for opportunities to increase your cash holdings or invest in cash equivalents like short-term bonds, certificates of deposit, or Treasury bills.

Collaborate With a Trusted Advisor

Most importantly, collaborate with your advisor to prepare for the next bear market. You don’t want to risk running out of money in retirement, so let your advisor help you mitigate any potential losses when the market dips. With their guidance, you can make informed decisions, no matter the market’s condition, and stay committed to your long-term investment strategy.

Reach out to us to explore how you can strengthen your current retirement plan, boost returns, and safeguard against losses—even during market downturns.