We get it. Market declines can be scary. And market corrections, or declines of 10% or more from market highs, can start you worrying overtime about running out of money.
In her recent article on market volatility, financial reporter Jeanne Sahadi of CNN Business interviewed me and other advisors about steps you can take to stop market declines from sinking your retirement.
First thing to note is that market corrections are normal and unavoidable. While we might wish that markets march forever upwards, that is just not realistic. Even strong markets need to take a pause and catch their breath from time to time, creating opportunities for you to jump in at lower price points. Just think of a correction as a 10% off sale on investments. As I said in the CNN article, “the lower the market goes, the better the investment going forward.”
Second, don’t wait until there is a correction to fine tune your investment allocation. Many investors now are under-diversified and have too much of their portfolio in U.S. growth stocks, and particularly in technology-related stocks, a consequence of seemingly never-ending market highs. Sure, most retirees do need growth to make sure their money lasts for the decades ahead, but should balance that with a common-sense emphasis on income and stability.
Finally, perhaps the most important thing you can do to make your money last through even the most trying economic times is to monitor your spending and stick to appropriate withdrawal guidelines. It’s a little bit like Goldilocks and the Three Bears. You want to spend just the right amount – not too much, but not too little, so you max your current lifestyle without jeopardizing your future. The good news: a reputable advisor can help you design an investment and spending plan that calms the market jitters and lets you sleep well at night.
You can read the entire CNN article here: Sequence risk: What is it and how can you protect your nest egg from it? | CNN Business