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.
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