Friday afternoon you clock out for the last time and walk into a big retirement party with all your co-workers. Following that, there’s another celebration over the weekend at home with friends and family. You’re looking forward to Monday morning, sleeping a little later, taking time to cook a nice breakfast with your spouse, and then spending the rest of your day doing what you want, when you want, with the people who matter the most to you.
However, when Monday morning rolls around you wake up to some unsettling news. The markets are down. Way down. The nest egg you’ve been building your entire life suddenly seems a lot less secure than it did a couple weeks ago.
This is a nightmare scenario that keeps some soon-to-be retirees up at night. Pondering this scenario can make your decision to set a retirement date feel like one that’s based on a lot of hope and luck. But, if you’ve been working with fiduciary advisors like my team at Keen Wealth, the good news is that there are both preventative and prescriptive measures we can suggest to keep your retirement on track.
1. Don’t panic.
You’ve been saving and investing for decades, so this isn’t the first bout of market volatility you’ve dealt with. It likely won’t be the last one either, whether you are retired or not. In fact, some retirees might look at the market when it’s down and decide that they want to buy more while prices are “on sale.”
When this happens, it’s good to take a breath and repeat what you’ve heard the Keen Wealth team tell you time and time again: market volatility is normal. Sure, this particular correction might feel worse because you no longer have that paycheck to fall back on. But this too shall pass. And in the short term, there are other levers that we can pull. This is when the “minimum of 5 years of income in fixed income” bucket comes in very handy.
2. Stay diversified.
When you’re young, a common retirement-planning strategy is to weight your portfolio towards higher-risk stocks that potentially provide a higher yield. Then, when you’re getting ready to retire, you start shifting your portfolio towards lower risk investments like bonds and CDs. The exact diversification of your portfolio will depend on the size of your next egg, your risk tolerance, and, your retirement goals.
This strategy of diversifying your portfolio while also tailoring it to your specific situation is one of the cornerstones of the Keen Wealth philosophy. Staying diverse can help minimize damage to your portfolio when the market does correct, and can also give you some flexibility to make adjustments as necessary.
3. Maintain an emergency savings account.
Again, there’s no magic, one-size-fits all amount of cash you should have access to in the event of an emergency. But once you retire, you’re going to stop paying FICA tax, and your monthly deposits into things like IRAs and 401(k)s will slow, and eventually, stop. As your financial picture shifts to taking required minimum distributions, collecting Social Security, and settling on an annual withdrawal rate, it’s a good idea to keep some of your retirement income in an accessible long-term savings account. The Federal Reserve has been increasing interest rates, so this might be a good time to shop around and see what local and national financial institutions are offering customers.
4. Review your budget.
However, when it comes to saving your cash in retirement, don’t overdo it. I know market corrections can be scary, but don’t let what’s happening on Wall St. ruin all the plans you’ve made for a fulfilling retirement on Main St.
Say it with me again: market volatility is normal. Seniors who can’t stop worrying about money may find that they have lived too conservatively by neglecting their comfort and their enjoyment.
Now, having said that, there’s nothing wrong with reviewing your budget. If you’re anything like the disciplined folks I’m lucky to work with at Keen Wealth, you’ll probably find some reassurance that your withdrawal rate and monthly budget can ride out this current dip.
Or, you might find that there are some non-essential items like subscriptions and memberships that you’re no longer using. These are things that you could consider putting on the chopping block, instead of the vacation you’ve planned out and paid for or your weekly grocery budget.
5. Call up your fiduciary advisor.
Folks who try to handle their retirement planning on their own, typically feel very lonely when the market drops. When you feel like your family’s financial future is at risk, it’s natural to feel like you have to do something. And it’s so hard to keep short-term market fluctuations in the proper context when you’re dealing with all that worry.
One of the simplest, yet most powerful benefits we offer our clients at Keen Wealth is to keep them focused on achieving their long term goals. We do this by providing an ongoing financial planning experience where we encourage clients to review their portfolios and their goals with us at least once a year. We believe this helps clients avoid making bad decisions that could ultimately affect their nest eggs and their legacies to their families. Our clients rely on our perspective, our experience, and our knowledge to guide them through any turbulence they might hit and keep them on course for a successful retirement.
Bill Keen is a CHARTERED RETIREMENT PLANNING COUNSELOR℠ and independent financial advisor with more than 25 years of industry experience. As the founder and CEO of Keen Wealth Advisors, a registered investment advisory firm, he specializes in providing personalized retirement planning designed to help people thrive before and during their retirement years. With a passion for educating others, Bill regularly blogs about retirement planning, hosts the podcast Keen on Retirement, and has contributed to U.S. News and World Report, Reuters, Wall Street Journal’s Market Watch, Yahoo Finance, and other publications. Based in Overland Park, Kansas, Bill and his team work with clients throughout the greater Kansas City area and across the nation. To learn more, connect with him on LinkedIn or visit www.keenwealthadvisors.com.
Keen Wealth Advisors is a Registered Investment Adviser. Nothing within this commentary constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Keen Wealth Advisors manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed here. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.