Is Your Retirement Plan Ready for a Downturn?
Market fluctuations are a normal part of the economic cycle, but when it comes to your retirement, the timing of when the market drops can matter more than how much it drops. Market volatility is an even bigger cause for concern when your retirement plan is sitting stuck at multi-year highs. In this quick video, we explore what you can do to prepare your retirement plan for a downturn to keep your retirement plan on track.
Transcript
Introduction to Market Volatility and Retirement
Most of us know that market fluctuations are part of a normal economic cycle. However, when it comes to retirement, the timing of when the market drops can be even more important than how much the market drops.
Hi, my name is Joe Dowdall, and I’m a financial planner at Worth Asset Management. The market volatility over the last couple of years has set many people back in their retirement planning. In this video, we explore what you can do to prepare your retirement strategy for a downturn so you can keep your plan on track.
Market volatility can mean the difference between living comfortably in retirement and just scraping by. And because we have a bear market on average about every three and a half years, there’s a very good chance that you could experience a big market drop in the early years of your retirement.
Stay Calm: The First Step to Protecting Your Retirement
The first strategy is to just stay calm. Take a deep breath. It’s easy to get swept away emotionally when the markets negatively affect your finances. But if you stay true to your strategy and avoid making decisions when emotions are high, you won’t run the risk of losing even more.
As long as you have a strong financial plan and rebalance your portfolio regularly, you are setting yourself up for success.
The Importance of Diversification and Rebalancing
We’ve all heard the importance of diversification when it comes to maximizing investments, but as you get closer to retirement, it’s even more important to invest in the right types of holdings. Rebalancing is also a key factor in keeping your portfolio balanced and safe.
You need to regularly analyze your portfolio to align it with your risk level and not become too reliant on any one asset category.
At Worth Asset Management, we follow a systematic approach using relative strength investing. We analyze the performance of securities across the entire market spectrum and then utilize a proprietary system that runs comparisons daily to identify strong market performers. Unlike traditional portfolio management, we don’t simply adjust weightings. Instead, we remove underperforming investments until they demonstrate renewed strength.
This process helps maintain a focus on portfolio growth while also managing risk. Our systematic approach removes emotional bias from investment decisions.
Build a Safety Net with a Contingency Fund
While our investment process focuses on finding strengths in the market, we also recommend maintaining a safety net. While cash investments may not provide a lot of growth, having a contingency fund with at least one year’s worth of expenses can guard against selling investments at low values to free up cash.
You can also examine your spending patterns and find ways to invest even more into cash or other cash equivalents, such as short-term bonds, certificates of deposit (CDs), or treasury bills.
Work With a Financial Professional to Minimize Risks
Perhaps the most important thing you can do to protect yourself against market volatility is to work with a professional. Work together with your financial advisor to plan ahead for the next bear market.
You don’t want to worry about running out of money in retirement, so let your advisor minimize your losses when the market drops. At Worth Asset Management, we can help you make rational decisions no matter the state of the market, and we can guide you to stay true to your investment strategy.
Get started today with a 15-minute introductory call. There’s no cost and no obligation. You can reach me at 469-423-1989 or send me an email at joe@worthassetmgmt.com.