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How to Protect Yourself Against Wild Market Swings in Retirement

1/19/2021

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Retirement is supposed to be the point in your life when you get to relax and enjoy the fruits of your labors. If you’ve planned well and prepared yourself financially, you’re more likely to be able to do just that. Many people choose to invest in the stock market to build financial resources to fund their retirement. While that can be effective, it does mean that you’re vulnerable to the wild swings that sometimes take over the market. So how can you protect yourself from them in retirement?

A Diversified Portfolio

The stock market tends to cycle from low points to high points and back around again. When the market swings, the tendency is for certain industries to trend downwards while others trend upwards. If your investments are all focused on a small handful of similar industries, you are more vulnerable to the trends of the stock market. Bydiversifying your portfolio, your investments will be more stable overall and you’ll be in a better position to weather market swings.

A Large Emergency Fund

You won’t get rich off of a savings account, but if you were relying on stock investments to fund your retirement and a market swing puts your income in jeopardy, having a large emergency fund saved up can make up the difference. You’ll need quite a large fund saved up if you’re going to rely on that for income though. The last dozen market downturns lasted roughly 14.5 months and took another two years to recover. You may find it difficult to build up a savings account that covers so much time, so finding other methods of temporary income may be necessary. You may find it helpful to take out a loan in some cases. Short-term loans are available to those with bad credit in emergencies, but these typically have high interest rates.

Be Disciplined in Your Spending

Overspending means that money won’t be there for you later. It’s just as important to follow awell-crafted retirement budget as it is in any other part of your life. If anything, it’s even more important since the bulk of your earning years are behind you. You don’t want to spend too much in the early years of your retirement only to find out later that you don’t have enough to pay for your needs anymore.

Protecting yourself against wild market swings in retirement is an important thing to plan for if your plan for funding your retirement involves the stock market at all. Having a diversified portfolio, building up a large emergency fund, and being disciplined in your spending can help you build up financial security. This preparation can help protect you from being vulnerable to wild market swings.

Read this next: How To Make Retirement Finances Less Complicated

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How to Make Retirement Finances Less Complicated

1/15/2021

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Retirement is one of those things that virtually every working person looks forward to. What they don’t look forward to, and may not even know about, is how complicated retirement finances can be. It’s not as straightforward as saving, investing, and withdrawing from accounts. So what can you do to make retirement finances less complicated?

​Work With a Financial Advisor

From working out the details of tax laws to making sound savings and investment decisions, there are a lot of financial details to weigh and consider. It can be a lot for most people to handle on their own. Financial advisors make it their job to understand the ins and outs of complicated financial topics and can help you sort them out and make a plan. Make sure you know what to look for in your financial advisor. Preparing for your retirement is one thing you definitely want to be working on with a reputable professional.

​Plan Ahead

Just like the rest of your adult life, there are a lot of expenses you’ll need to pay for in retirement. You’ll still need to pay for food, some housing-related expenses, transportation, and health care. People qualify for Medicare when they turn 65, but having government-provided health insurance doesn’t necessarily make things simpler. There are many Medicare plans to choose from, and this can get complicated for retirees. Planning ahead is critical if you want to make the best decisions for your situation. It’s also vital if you are to understand how much money you need to have to fund your retirement. ​

Consolidate Your Finances

If you’ve accrued multiple checking and savings accounts over the years, consider consolidating them to make finances simpler. This is especially helpful if you have accounts at multiple financial institutions. Consider whether or not the different credit cards you have are worth keeping open. If not, pay them off and close the accounts. You’ll find finances are simpler with fewer accounts and balances to keep track of. Similarly, you can simplify your investments by finding and eliminating redundancies in your investment portfolios. It is possible to consolidate your funds and simplify your investments while maintaining a diverse portfolio. Consider reallocating them to stock and bond index funds with a broad representation. As an added bonus, doing so can help you save on portfolio management fees and reduce the amount of attention you need to give it.

Retirement finances can be complicated, but there are things you can do to make them less so. Work with a financial advisor, plan ahead, and consider consolidating your accounts. This can make it easier to be prepared for retirement as well as the financial complications you could encounter along the way.


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    Author

    My name is Dan Hopwood and I first started my career in the insurance business back in 1988.  2023 will be the start of my 35th year in the business. 

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