The Retirement Question
At a recent Social Security workshop, I presented I was asked the question on every baby-boomer’s mind these days.
“What should I do with my retirement funds with all this volatility in the stock market?”
The answer is not simple but is not as complicated as many would have you believe. The question “assumes” a few things:
A.) that one can’t afford another ’08-’09 catastrophe, in which many who were planning retirement were forced to postpone their plans until their accounts “re-gained” their lost equity. You probably know somebody like that.
B.) that there is a “time factor”— essentially saying, “I don’t have the time to wait to have the market rebound from a steep plunge in values.” (about 4-5 years typically).
C.) that “one needs the money to live on,” and any prolonged market down-turn will directly affect the quality of one’s retirement lifestyle.
The Answer.
Of course, not everyone has similar interests, finances, or economic conditions, but there are a few commonalities which can be considered:
1.) If you are planning retirement within the next 4-5 years, you need to “get safe” with your money now. You don’t have the time to wait to earn it back in the event of another financial meltdown …over which you have no control.
2.) If you are relying on that retirement fund to help “guarantee” your expenses after you retire, then does it make sense to chase an extra few percentage points in this volatile market? You are gambling the security of your retirement in the market!
3.) We all have short memories, and we certainly don’t like being reminded of tough times or events. We don’t want to remember what happened to us, or our co-workers in’ 08-’09, and the financial upheaval that those considering imminent retirement suffered. The dilemma: how to get safety and still get reasonable growth?
4.) To compound the problem of market volatility, however, is that for years, the government pumped $85 Billion a month into a phantom economy to necessarily postpone another huge market downturn. Artificially suppressed interest rates provided an illusion of economic “well- being.” The result? Potentially massive inflation which will erode the buying power and value of our retirement funds.
Am I right ?
Look, the market has always rebounded from the kind of volatility we see these days. If it is down when you want to retire…and you need your market equity to live-on, then you either postpone your retirement (until the market comes back), or you accept a lesser standard of living due to the reduced value of your funds. Timing is crucial, and you can’t control the market. ( I suggest you google “Sequence of Return Risk”). But if Stocks and Mutual Funds are your thing, then you take the
Good with the Bad. Or in reality, the Risk with the Gain!
The only certainty with the market is its continual UNCERTAINTY. You gamble your retirement savings every day in the Wall Street Casino, chasing some imaginary number, and hope that you “time” the market so you won’t be affected by market volatility. How many years did you work for a worry-free retirement? Yet, your funds are at Risk constantly!
The Alternative “ifs”, “ands”, or “buts”:
IF you will need your retirement funds to help pay your living expenses…
AND you are approaching retirement age, or making retirement plans…
BUT you find yourself “stuck” on the market merry-go-round…
Then you need to educate yourself about the choices and options you have available to guarantee income, participate in market growth, safety, and control over your important retirement funds.
It is no longer a choice between “safety” and “growth.” You can have both and control your important retirement funds.
