How to Manage Your Retirement Plan During Market Volatility?

It’s no secret that financial markets can be highly volatile at times. This volatility can upset even the most well-thought-out retirement plans. 

A cardinal rule that reputed financial advisor services follow in times of volatility is: to be patient. It’s crucial to ride out the market’s fluctuations as asset prices tend to recover over time. 

However, if you’re retired or will retire soon, you may not always have the option of waiting it out. Hiring retirement financial advisor services can be helpful in most cases. 

In any case, you can always take certain steps to tap your investments for income even in an unstable economy. 

Mentioned ahead are a few important tips to help you manage your retirement plan in a volatile market. 

Diversify Your Portfolio

This is possibly the most important thing you can do to mitigate unforeseen investment risks. Ask any retirement financial advisor services provider and they’ll second this. 

Some investors put all of their savings in mutual funds assuming that their money will always stay safe that way. However, it’s not that simple. 

For optimal diversification, investors can always go for proper asset allocation. This refers to the amount of each asset class you own. It can be in the form of stocks, bonds, commodities, real estate, cash, and others. 

As a rule of thumb, you should try to reduce exposure to riskier holdings as you approach your retirement. Most financial advisor services will recommend this as these holdings can be highly unstable. When the economy goes bust, you’ll be left with a huge hole in your pocket. 

As you get older, you’ll have less time to wait for recovery during such times. Well-known wealth management service providers can help you determine the most suitable asset allocation strategy in keeping with your age and investment goals. 

Of course, these assets will either gain or lose at different rates over time. Hence, it is advised to regularly get your account rebalanced and ensure consistent allocation.   

Hold on to Cash or Cash Equivalents

If you’ve already retired, you’ll need to be extra careful with balancing your investments. In fact, most investment professionals will suggest holding on to some stocks to avoid exhausting your assets and securing your old age. 

As retired investors, you need to realize that unlike younger investors, you don’t have the advantage of a long time horizon. To protect your investments from economic downturns, keep around five years’ worth of expenses in cash or cash equivalents handy. 

These can include short-term bonds, certificates of deposit, and Treasury bills. Providers of retirement financial advisor services may be able to suggest other equally good or better instruments.  

Often, expenses tend to become relatively more stable during the retirement years. However, you never know when a big expense will come along. If and when this happens, you want to be prepared for it by having some cash on you. The last thing you want to do is break your investments when they’re down, especially since dire market conditions are temporary. 

Avoid Overspending

Needless to say, the more money you make before retirement, the better equipped you will be to deal with a market slowdown. However, not exercising restraint and going overboard with your spending can get you in trouble. In other words, you may end up making poor investment decisions driven by insecurity and desperation. 

The key is to be cautious with your withdrawals. Most retirement financial advisor services providers typically suggest withdrawing no more than 3% to 5% of your total funds in a year of retirement. This will help you maintain a sustainable lifestyle. Thereafter, consider the inflation rate at the time of making a withdrawal and you should be good. 

Do engage financial advisor services to understand how you can sustainably plan your withdrawals. This will help you avoid taking out too much of your retirement assets. Your advisors will devise a solid strategy considering the current and forecasted market conditions so you don’t have to go into panic mode when the economy struggles. 

Impulsiveness Can Cost You Big

When stocks plunge due to a market slump, it can be tempting to sell them off and cut your losses. However, experienced retirement financial advisor services will always advise against this. That’s because it’s better to stick the turbulent phase out. 

In fact, regularly rebalancing your portfolio will mean buying more stock when the chips are down to keep your allocation in check. This will allow you to purchase at a low rate. When the economy eventually revives, you can sell those stocks and earn a profit. 

Having said that, it is equally important to stay disciplined even when the economy is stable. Ask any financial advisor service, and they’ll concur. When saving for retirement, avoid cutting back even when your 401(k) is exceeding expectations. Remember, the market will always fluctuate. In such situations, those who take the right steps before a slowdown will have an easier time dealing with it. 

Conclusion

Economies constantly change due to several factors that may or may not be under our control. For this reason, the boom-and-bust cycles are going to be inevitable. If you’ve retired or are approaching retirement, you want to play it safe. Fortunately, being disciplined with your investments can pay off, especially in the long run. This involves diversifying your portfolio, having cash reserves, and refraining from making impulsive decisions, among other steps. If you’re unsure how to go about it, you can always consult proven retirement financial advisor services. Remember, being patient and cautious will almost always see you through in the bear market scenario. Good luck!