Most of us feel a bit of anxiety as we approach our target retirement date. You want to be sure that you’ve planned for everything, but as you know, some things in life cannot be planned. Instead, we can only plan how to handle surprises that come our way. So with that idea in mind, it’s time to ask yourself if you have addressed the risk of future stock market volatility, and how it might impact your retirement plans.
One of the main concerns with stock market volatility is that you don’t want to be forced to sell assets during a downturn. You’re on the right track with this thinking, so let’s delve into the issue a bit more.
The first thing to remember is that stock market volatility is expected. Fluctuations will always happen, so there’s no need to worry about whether they will. Your main priority should be designing a strategy that helps you sail through any uncertain waters.
So let’s talk about risk. In your thirties, risk didn’t feel as scary (with regard to your retirement portfolio). If you did suffer a loss, you knew there was plenty of time to make up for it over the next few decades. But in your sixties, a loss can feel much more alarming. A dip in the market at this time can feel scary, and maybe even put you off the idea of retirement. Retiring during a market downturn means you must begin withdrawing assets during a time in which they have lost value.
Luckily, a market downturn doesn’t have to mean that you can’t retire. Diversifying your portfolio will allow you to hold some money in more stable assets. Those are the ones you can sell during a downturn while you wait on the more volatile ones to recover their value. We do this by dividing your assets among a mix of stocks, bonds, and cash.
The right mix for one person won’t necessarily work for another, so there’s no single diversification strategy that always fits every situation. We should meet up to discuss your risk tolerance and retirement goals, and then we can help you diversify your portfolio in a way that helps you to feel more confident about the future.