As retirement inches closer, you may worry more about market cycles. These proactive ideas help you focus on your financial goals, not the news headlines.
When the stock market swings, most people’s moods swing with it. And, the closer you are to retirement, the more frequent those mood swings might be.
Unfortunately, though, feelings and money rarely make good bedfellows, which makes having a plan even more important when you’re near the retirement finish line. “It’s normal to worry about investment losses, but don’t forget about the gains you’ve made over the years,” says Heather Winston, a financial professional and head of product strategy for Individual Solutions at Principal®.
If you’re just a few years from or a year or two into retirement, these insights can help you protect your savings—and your long-saved-for financial goals—if the markets are volatile.
Perhaps you’ve always had a firm date and age to retire. That’s great; if you’ve saved enough and feel good about your budget, you can stick to that timeline. “A solid plan can help anchor your emotions and help keep you from making costly snap decisions,” Winston says.
But if you’ve never had an exact day pinned on the calendar, or feel working longer might benefit your finances, you’re not alone. Americans age 65 and older are working in greater numbers than ever before: 19% are currently employed, and are working more hours than they did about 40 years ago.
Working longer may help retirees if they need to or want to delay dipping into retirement savings. And if markets are volatile and it’s an option for you, it may help you protect and add to what you’ve put aside.
It may feel counterintuitive to save when the markets are volatile, but the money you put away has growth potential, too, for when markets cycle back up. “When markets go down, people look at their investment statements and don’t like the numbers,” Winston says. “That’s normal. But changing your investments because of what you see on a statement versus a longer-term view may not be rational.”
In fact, should you stop contributions or make untimely withdrawals, you may face what’s called abandonment risk. This simply refers to the possible negative impact to your retirement savings should you stop contributions or if you make withdrawals from your retirement savings. If you exit during a downturn, you may lose the potential for growth, decrease your overall savings, and ultimately put your long-term goals at risk.
One option to think about is boosting 401(k) or individual retirement account contributions, automatically if possible. You could funnel a percent or two of any salary increase, or an entire bonus as a lump sum, or take advantage of catch-up contributions once you reach age 50, up until age 64, into retirement savings. If you make a lump-sum contribution when the market is in a valley, you’re also buying at a reduced price.
One way to help maximize your retirement savings’ growth and minimize loss is through your investment allocation. This is simply choosing a mix of investments that typically align with your risk tolerance and timeline: The longer you have to accumulate and grow savings, the more you’re able to tolerate risk. The opposite is true as you’re nearing retirement, when investments have less time to recover and you’re more focused on stability. 
If you’re unsure if your asset allocation, risk tolerance, and timeline are aligned, your financial professional can help.
Say you’ve started retirement and taken out a big chunk of savings, just as the markets enter a period of decline. You’re reducing your savings, but you’re also reducing the bucket of funds that may grow in future years. To avoid this, some retirees take out less in those early years of retirement, using other savings as necessary.
You may have also had grand plans for the first year (or two) of retirement. But jittery markets may mean a reassessment of your expenses. Adjusting both your immediate to-dos and your timeline may be a practical way to approach the start of your retirement.
Even if the markets are volatile, there’s plenty you can control if you’re nearing retirement or just started retirement. Perhaps you’re able to focus on a debt to pay off, a long-term trim to your budget, or small but steady contributions to your emergency savings funds. All pay benefits in your retirement years to free up income and build up your financial cushion.
Are some retirement funds better than others during a period of market volatility? When it comes to taxes, the answer may be yes. Dividends and interest, if available, keep you from tapping into the original funds you put aside. They also have different tax implications, which may help with your retirement budgeting decisions. Your financial professional and tax advisor can help you strategize what makes the most sense for your situation.
The 24-7 news cycle makes it easy to get swept up in the emotional roller coaster that is your investments. But that hyper focus on which way the markets are trending may cause you to lose sight of what you’ve been working toward all along. “Keep thinking further ahead, not just about what happened today or this week,” Winston says.
A financial professional can help talk you through what’s happening in the markets that you don’t understand, “even if the conversation validates what you already know,” Winston says.
“Listening to the news for investment advice can be like diagnosing yourself using medical articles from the internet—informative, but not always applicable to your situation,” Winston says. “If you want to know how market moves could affect you and your plans for retirement, you may need more personalized attention.”
How on track are you for your retirement goals? Use our to see how your current investments stack up.
