We saw record highs in 2021, but 2022 may turn out to be an entirely different story. The market is reacting poorly to the prospect of slow economic growth and the reality of high inflation. We recently saw the NASDAQ have its worst loss since 2020. Many investors may fear a recession amidst a volatile market, high inflation, and changes in Federal Reserve policy.
Market drops can be caused by any number of unpredictable real-world events, such as the coronavirus pandemic, political instability, and natural disasters. There is simply no way to foresee all the periods of market volatility that may occur throughout your retirement. And while suffering a market drop in your younger years can be fine, it can pose much more of a threat as you near and enter retirement. You can’t control any of these things, but you can plan to address the effects and avoid common mistakes.
Tips for Handling a Volatile Market
DON’T make decisions based on emotions. This can be an easy trap to fall into when your financial security is at risk. You may want to pull all your money from the market when it drops to save your money from a major correction, but it may be wiser to allow time for the market to recover.
DON’T withdraw early from your 401(k) or IRA. While this might seem tempting during volatile periods, it’s typically not a good idea to cash out of your 401(k). If you withdraw money before age 59 ½, you could have to pay the early withdrawal penalty of 10%.
DON’T get freaked out by the news. Information is power, but making decisions solely based on every-changing headlines can create problems.
DO get information and plan!
The Triple Threat Facing Retirees Today
Today’s retirees may face a difficult combination of factors: a volatile market, low interest rates, and higher inflation. The question is what to do about it. There’s no simple solution or single piece of advice that applies to every single person, but there are many strategies available that we can explore with you. Don’t let your retirement and financial well-being be held hostage by a volatile market or inflation – come speak to us about what you can do to help protect your retirement savings.
Contact us today and we’ll set aside time on our calendar to discuss your personal situation as it relates to current market fluctuations and the estate planning process.
Remember, we are here to Help You Live a Richer Life….