Retirement - Coping With Stock Market Volatility
The volatility of
the stock market over the past few years has resulted in many investors
seeing their retirement accounts shrink in value. While the stock prices
may rise over time, many individuals are being forced to re-examine their
retirement plans. For older individuals with less time until their planned
retirement, a serious review of their financial future may be essential.
The fundamentals of planning for a financial secure retirement are simple
- have enough money accumulated at retirement so those savings and the
earnings on those savings will enable you to afford the lifestyle you
want until you die.
declines and reduced expectations for future market returns are playing
havoc with many retirement plans. Within the current environment, here
are some options to consider as you refine your retirement plan:
Save more while
you are working.
Be sure to take full advantage of any company offered retirement plan.
If you participate in a 401(k) plan, contribute as much as you can and
at least enough to earn the entire match the company may offer.
Set up an automatic savings plan. Have a set amount deducted from each
paycheck and deposited into an account you earmark for retirement.
Examine your monthly household spending to see if there are ways to spend
a little less. Refinancing your mortgage, increasing your insurance deductibles
and reducing spending on discretionary items can add up.
Earn more on your
retirement assets before you retire.
Examine how your funds are invested and how your "cash" is employed.
A well thought out asset allocation for your investments, one that incorporates
your time horizon and risk tolerance, can provide diversification and
some peace of mind. Generally, the younger you are, the more of your long-term
investments should be in equities. Over time, high quality stocks have
produced greater returns than bonds and cash investments.
Your cash should be
working hard too. Take advantage of higher interest rates on accounts
that provide less liquidity and on longer term CDs if you can leave the
money in the accounts or CDs for longer periods.
Work longer until
Delaying your retirement enables you to have more for retirement in several
- While working,
you can save more in your retirement plan and through regular savings.
- Especially with
your tax-deferred retirement accounts, leaving all your funds within
the account enable them to grow faster. For example, if you delay retirement
for five years and earn just 5% on the funds, you will have about 27%
more just from the earnings.
- Delaying when
you start collecting Social Security will increase your monthly benefits.
If you are currently 55 years old, you can start collecting full Social
Security retirement benefits at age 66. If you start at age 62, you
will only get about 75% of that amount and if you wait and start collecting
at age 70, you will get about 130% of that amount.
Spend less during
your retirement years.
Everyone wants a "full and active lifestyle" during retirement.
Perhaps you should consider changing exactly what the "full and active
lifestyle" means. Less travel, less expensive cars or foregoing a
second home (or opting for a smaller one) will make a difference. Anticipating
and setting sensible spending priorities will probably be part of many
Leave less to your
What you do not spend during your lifetime will pass to your heirs. It
may be unpleasant to consider, but spending time with your family discussing
your finances can help them prepare as well.
The declining stock market has affected almost everyone. Taking some time
to evaluate your overall retirement plan. If you find ways to save more
and invest the funds wisely, the retirement you seek may still be possible.