Introduction
The financial markets are currently struggling, and I completely understand your frustration and valid concern about the decline in your retirement accounts and the remaining funds you have. Given the impact of the markets on your retirement savings, you may need to be more flexible with your retirement spending. While it is generally advised not to withdraw more than 4% of your retirement savings per year, you can stretch your savings by cutting back on expenses and reducing any unnecessary costs.
Balancing Retirement Accounts
You say that your investments are in a balanced robo-advisor account, but I’m not sure how balanced it really is. As a retiree, it would be wise to reduce the amount of volatile assets in your portfolio, so you are not at risk when you need your money most. So consider reducing stocks and increasing bonds. This way, even if the markets fluctuate, you won’t feel the shocks as much.
Consulting a Financial Advisor
While it is wise to be cautious of anyone who just wants to move your investments from accounts they manage to accounts they control, it does not mean that seeking a financial advisor is a bad idea. Investors are facing challenges with inflation, a bear market, and the possibility of recession, and depending on your circumstances, you may benefit from the help and expertise that an advisor can provide.
So how do you choose? Make sure to select someone with a good reputation, and since they will help you with your investments, they should be registered with the Securities and Exchange Commission (SEC) or the appropriate state regulatory authority. You will want to ask other questions about their compensation, fees, typical clients, investment philosophy, their approach to money, and areas of expertise to ensure they will act in your best interests. Most importantly, if they do not seem like a good fit for you, do not hesitate to continue your search.
Addressing Fears
I want to address your fear of “losing everything.” You didn’t tell me your age, so I don’t know if you are newly retired or much older, but in either case, the odds are high that you won’t lose everything. I won’t lie to you: there is a very good chance that you have seen a decline of 10% or more in your assets – and they could drop further.
But if you have been investing for a while, even with the losses you have experienced so far this year, you still have more money compared to what you had when you started, right? And here’s the good news: bear markets do not last forever.
Stocks typically rise – the question is when, and if you can weather the storm until that day arrives. Historically, bear markets last an average of 289 days. During those bear markets, stocks fall by an average of 36%. On the other hand, bull markets last an average of 991 days, or more than 2.5 years. Investments usually increase by more than 110% during a market upturn. A potential recession may extend bear markets, but even recessions typically end after about one to two and a half years, according to historical data.
So ask yourself, “Can I hold out for the next year or two?” Once you make some adjustments to your spending and portfolio, I feel you may be surprised by the answer to that question.
And remember, bear markets are normal, and over the next ten to thirty years, investors will see more of these markets. So, a decline in the markets should not send you into a panic. Now take a deep breath. While it seems frightening now, you and your retirement accounts will be able to overcome this.
–
Kristen
If you have questions about money, Kristen is here to help. Submit an anonymous question and she may answer it in a future article.
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Source: https://www.thebalancemoney.com/what-to-do-when-your-retirement-investments-are-losing-money-6259777
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