Tracking your retirement portfolio can be an overwhelming task, but trying to keep up during a volatile market can be extremely difficult and downright stressful.
One of the greatest investors of all time, Warren Buffet said after a major sell off in 2018 to “keep a level head”. This seems easy to do until the market drops like a hammer, a staggering twenty five percent over the last several weeks. Mr. Buffet has billions of dollars more than we do, but he understands the investing arena better the anyone. Even at 88 years old, Mr Buffett does not believe a market sell-off should be feared, but it should be perceived as an opportunity. While working around many older adults and retirees, we understand quite well how hard it can be when you see 25 percent of your retirement evaporate in less than a month. Regardless of the situation, most analysts recommend staying cool and not doing anything irrational when the market hits the skids.
If you are thinking about your next steps, these tips may help give you comfort during a volatile market for those in or nearing retirement.
Take Time to Evaluate your Retirement Plans - During this time it makes sense to reevaluate your goals and determine your needs and risk factors. Most investment advisers recommend staying calm and hanging onto your portfolio. Like most successful people, they have goals and investing and preserving your retirement require the same strategies. You will be ahead of the game if you establish crystal clear plans for a bull market, a bear market and even a wild market like we are experiencing now. By establishing a date for retirement, you can allocate your portfolio accordingly. If you have 10, 20 or 30 years until retirement, you can afford to be aggressive. On the other hand, if you have 5 or less years until retirement, you may consider allocating your investments more conservatively in income producing investments.
Short and Long Term Needs - It is a good idea to have enough cash on hand to last 12-36 months in case of a crisis. It will determine your risk factor, but 12, 24 or 36 months is the least amount of cash you should set aside, as a way to give you comfort during uncertain times. By having your allotment of cash set aside, it will prevent you from hitting the panic button too quickly. I was on a conference call today and heard a lady who was in tears because she panicked and sold all of her investments. If you are in retirement or are within a few years of retiring, this market may cause undue stress, however having cash set aside will prevent irrational behavior. Setting aside short term investments makes life so much easier to sleep at night. Even at retirement age, chances are good that you will live another 25 plus years, so keeping funds invested long term will allow for needed growth in your portfolio. Additionally, the recently passed SECURE ACT that we wrote about in January provides new tools to help with seniors retirement savings. By removing the IRA age limitation, older adults can continue contributing beyond the age of 70 ½. With medicine and heath care continuing to improve and our older Americans taking better care of themselves, having a healthy balance of stocks and bonds will allow their portfolio to continue to grow.
Stay the Course - Nobody has a crystal ball, but most investment advisers think it is prudent to stay calm in volatile markets, but that can be easier said than done. Warren Buffet and others believe it is wise to hang in there during bumpy markets for the long term and possibly add to your holdings during this time. Mr. Buffet doesn't believe you should worry as much about the short term sell-offs and swings. If you decide to pull out of the market, chances are pretty good you may miss out on the rally.