{"id":9138,"date":"2022-03-06T07:28:50","date_gmt":"2022-03-06T11:28:50","guid":{"rendered":"https:\/\/kerryhannon.com\/?p=9138"},"modified":"2022-03-06T07:30:25","modified_gmt":"2022-03-06T11:30:25","slug":"how-to-keep-the-volatile-stock-market-from-shaking-your-retirement-savings","status":"publish","type":"post","link":"https:\/\/kerryhannon.com\/?p=9138","title":{"rendered":"Keep the volatile stock market from rocking your retirement savings"},"content":{"rendered":"
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When the stock market plunges, you catch your breath, bite your lip, and try really hard not to think about the value of your retirement account.<\/span><\/div>\n<\/div>\n<\/div>\n<\/div>\n
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That\u2019s just what’s happening as Russia invades Ukraine. Investors are nervous, and stocks are tumbling.<\/p>\n

For small investors, whose biggest exposure to the stock market is usually their retirement account holdings \u2014 401(k), 403(b), 457 plans, the federal government\u2019s Thrift Savings Plan, and Individual Retirement Accounts (IRAs) \u2014 it\u2019s in a word \u2014 unnerving.<\/em><\/p>\n

For advice on how to weather whipsawing markets and manage retirement savings, I asked a handful of investing pros. Here\u2019s their advice followed by mine.<\/p>\n

Read on Yahoo Finance<\/a><\/strong><\/p>\n

The basic advice: Markets go up and down, and the more years you have until retirement, the less you should be torn up in knots by the turbulence. That\u2019s because historically, the market has rebounded, even after deep drops in value.<\/p>\n

Keep in mind, they said, that the Dow was up more than 18.7% in 2021, the broader S&P 500 market index was up 26.9%, and the small-stock, tech-heavy Nasdaq index gained more than 21.4%.<\/p>\n

Put your money in \u2018buckets\u2019<\/strong><\/h2>\n

\u201cVolatility is uncomfortable, especially as a retiree,\u201d said Zaneilia Harris<\/a>, a certified financial planner and president of Harris Wealth Management Group in Upper Marlboro, Md. \u201cNo one wants to go through watching their account balances fluctuate. However, it is part of the investing process.\u201d<\/p>\n

Her advice: \u201cThink of your assets in buckets. Money for now, money for a specific future need, and money for later, ten years or more. Keeping a specific amount in cash to help ride out market fluctuations is extremely important.\u201d<\/p>\n

A good time to review your investment portfolio<\/strong><\/h2>\n

Lisa A.K. Kirchenbauer, financial planner and founder of Omega Wealth Management <\/a>in Arlington, Va., is more direct:<\/p>\n

\u201cEmbrace volatility,\u201d she said. \u201cWhen the market takes a dive, your periodic 401k\/403b contributions are getting to buy into your chosen investment strategy at a cheaper level.\u201d<\/p>\n

That\u2019s a good thing. \u201cGiven that retirement savings is generally longer-term money, getting the opportunity to buy in on a dip is a benefit that will pay off in the future,\u201d Kirchenbauer said.<\/p>\n

Meantime, for your existing retirement contributions that are already invested: \u201cStay the course,\u201d she advised. \u201cThis is long-term money.\u201d<\/p>\n

But for those on the cusp of retirement, that may not be the best move.<\/p>\n

\u201cIf you are retiring in the next year and will need to begin withdrawals from your retirement plan, then you may want to revisit your investment strategy to have cash set aside to meet those needs,\u201d she said.<\/p>\n

In a higher interest-rate environment, it\u2019s a good time to own quality value stocks and small and mid-cap value mutual funds, said Clark Kendall, CEO of Kendall Capital <\/a>in Washington, D.C.<\/p>\n

\u201cIn today\u2019s market, it is more important than ever to pay attention to valuations, price-to-earnings ratios, price-to-cash flow, and good dividend yields,\u201d Kendall said.<\/p>\n

Adjust asset allocation<\/strong><\/h2>\n

Also key: Take five before you make any emotional investment decisions about your retirement funds.<\/p>\n

\u201cLook at how your overall retirement funds are invested,\u201d said Catherine Collinson, CEO and president of the Transamerica Institute<\/a> and its Transamerica Center for Retirement Studies<\/a>.<\/p>\n

Understand your asset allocation from stocks and stock mutual funds to bonds, bond funds and cash, she said. \u201cMost people get upset about the stock market plunging when in reality their retirement accounts have some built in ballast, often with strategic target date funds.\u201d<\/p>\n

According to Transamerica Center for Retirement Studies’ most recent survey o<\/a>f workers, only 4 in 10 said they know \u2018a great deal\u2019 about what asset allocation is and how that impacts their accounts.<\/p>\n

My turn<\/strong><\/h2>\n

Now two pieces of advice from me. Financial education rules the day. Understand why the stock and bond markets are operating the way they are. Trust me, it helps to ease anxiety when you realize it\u2019s not pure madness and mayhem. There are underlying triggers to these corrections.<\/p>\n

Create and maintain a balanced portfolio. My retirement funds are stretched out across a range of asset classes, from large companies and dividend-paying stocks to emerging growth firms to global stocks to real estate and bond fund indexes.<\/p>\n

A target-date fund, which typically blends low-cost stock and bond index funds, is one way to do this. Balanced index funds are another choice. They both rebalance your holdings automatically when markets fall for a stock and bond allocation that fits your risk tolerance, say 60% stocks and 40% bonds. That means when stocks drop, you\u2019re buying.<\/p>\n

So when markets gyrate, yes, I worry, but I know I have built-in guardrails.<\/p>\n

A financial advisor acts as a sounding board<\/strong><\/h2>\n

Working with an advisor can help you get ready for sinking markets\u2014and stay grounded when they show up. Recently, my advisor calmly reminded my husband, who is on the cusp of 68, and me that we\u2019d taken some of our retirement funds out of equities a few months ago, so we had cash on hand to help cushion a dragged-out downturn. I\u2019d overlooked that.<\/p>\n

She then mentioned ways to rebalance and help protect our accounts moving forward and even suggested a few investments we might consider making while the markets were down.<\/p>\n

\u201cI\u2019m certainly not taking this lightly,\u201d she told us. \u201cBut your portfolio was built with diversification. We\u2019ve been through many of these events before and we will get through this one.\u201d<\/p>\n

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Kerry Hannon (Photo Credit: Elizabeth Dranitzke)<\/figcaption><\/figure>\n

by Kerry Hannon<\/a><\/span><\/strong><\/p>\n

Editor’s note: This article was originally published on Jan. 28, and it was updated on Feb. 24 after Russia invaded Ukraine.<\/em><\/p>\n

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Kerry is a Senior Reporter and Columnist at Yahoo Money. Follow her on Twitter<\/em> @kerryhannon<\/em><\/a><\/p>\n

Read the latest personal finance trends and news from Yahoo Money.<\/strong><\/a><\/p>\n

Follow Yahoo Finance on<\/em><\/strong> Twitter<\/em><\/strong><\/a>,<\/em><\/strong> Instagram<\/em><\/strong><\/a>,<\/em><\/strong> YouTube<\/em><\/strong><\/a>,<\/em><\/strong> Facebook<\/em><\/strong><\/a>,<\/em><\/strong> Flipboard<\/em><\/strong><\/a>, and<\/em><\/strong> LinkedI<\/em><\/strong><\/a>n.<\/em><\/strong><\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n