So, what do you adjust after a down year in the stock market?
Update Your Plan
As always, review your overall financial plan to assess your current retirement trajectory first. If you work with a financial advisor or do this yourself, this should always be your starting point. You may find that you’re still on track, even with the ugly year we had last year. If so, there’s no need to make any changes.
If you find that your retirement plan has changed enough to make you uncomfortable, you still have options. One potential adjustment could be to reduce your retirement spending in the short term. This could involve cutting back on non-essential expenses or finding ways to increase your income.
Consider Delaying Retirement One Year
Another option could be to delay your retirement date one more year. This can give you more time to save and potentially allow the market to recover, which could help increase the value of your retirement savings. I think people often underestimate the difference that working one more year could make.
One year is often the difference between feeling stressed and feeling comfortable.
Review Your Portfolio Allocation
It’s also important to consider reviewing your investments to help dampen the impact of market fluctuations. This could involve investing in a mix of different asset classes, such as stocks, bonds, real assets, and cash, which may help give you a smoother ride than being invested in – let’s say – 100% tech stocks.
Finally, it’s important to remain calm and not make any rash decisions. While it may be tempting to sell off your investments during a down year, it’s important to consider the long-term impact of such a move and to speak with a financial professional before making any significant changes to your portfolio. The idea is to buy low and sell high, not the opposite.
If you need help planning your retirement, then click here to set up a quick, complimentary introduction call to see if Prana Wealth is a good fit. We do still have the capacity to take on new clients.
As a fee-only financial advisor in Atlanta, we can (and do) work virtually with clients all across the U.S. and we’re here to help you when you’re ready.