Baby Boomers Preparing for Retirement in a Volatile Market

Preparing for Retirement in a Volatile Market: Advice for Baby Boomers

Retirement planning changes throughout your life. Every time you experience a life change, like starting a family, taking care of aging parents, or even sending your children to college, your plan, strategy, and budget also change. In addition, things outside of your control, such as ebbs and flow in the market, can impact your retirement nest egg, forcing you to revisit your plan and approach.

For baby boomers specifically, retirement planning has changed drastically over the years as the nation struggled with the 2008 recession, the 2020 COVID-19 pandemic, war, political unrest, and companies shifting from pensions to 401(k) plans. These changes have impacted the generation by posing financial hardships that limited discretionary income for retirement savings in the short- and long-term.

According to 2020 Census data summarized by the Hill, only 58% of baby boomers have retirement accounts, leaving a large percentage of retirees relying on Social Security, which only averages $1,800 per month. This disparity creates a lack of retirement preparedness which can be amplified with future market change and increased expenses.

For baby boomers, these statistics may be alarming, especially as the market continues to experience highs and lows. Read below to learn how to prepare for retirement in a volatile market and ensure your future nest egg is secure.

Diversify Your Portfolio

 As you age, your retirement strategy shifts from aggressive to moderate to conservative. Today, as a baby boomer nearing retirement age, it’s best to have conservative investments in a variety of asset classes that will remain stable throughout current and future market changes.

Investopedia lists some examples of asset classes, as noted below.

  • Stocks: Investors own shares of a company that can be purchased, sold, and traded on the stock exchange.
  • Bonds: Investors pool money for companies offering bonds and earn dividends on the pooled funds over time.
  • Exchange Trade Funds (EFTs): Another type of pooled investment that tracks indexes, sectors, and commodities.
  • Real Estate: Investors purchase land, commercial, or residential property and either rent it or sell it for a profit.

While the assets listed above are associated with varying levels of risk, they also allow investors to diversify their portfolios and protect their nest eggs. As some assets are impacted by ebbs and flows in the market, others may remain stable or unaffected, resulting in a more stabilized portfolio mix overall.

If you haven’t reviewed your portfolio in a while, now is the time. Meet with a financial advisor to review your assets, risk, and strategy. Slavic401k has a wealth management team that can help you review your current investments and make recommendations for the short- and long-term future.

Review Cash Solutions

While diversifying your portfolio can help you manage risk, you should also have cash strategies that will protect you in the event that a wide variety of asset classes are impacted by a market downturn.

Cash solutions include the following:

  • Certificate of Deposit (CD): These fixed savings plans allow participants to invest in a plan for terms of six months, one year, or five years, and benefit from earnings over that period. When shopping for a CD, look at rates from different financial institutions to ensure that the benefit is worth the time investment. Once your money is in the CD, you won’t be able to withdraw it until your term is complete.
  • Savings Account: Having a savings account is a crucial component in financial management. As you earn money, you should be setting aside funds for the future in a savings account, ideally 20%. Many people use the 50/30/20 budget tool to stay on track by assigning every dollar earned to a saving or spending category. By doing this, you will build up your savings account which can help you maintain expenses during retirement, especially if your retirement savings in a 401(k) or IRA plan have experienced losses in the market.
  • Emergency Fund: Another way to protect yourself against market volatility is to establish and manage an emergency fund. This cash strategy helps people save for the future beyond a typical savings account by setting aside funds beyond normal day-to-day spending, including medical emergencies, vehicle and home maintenance, and other unexpected expenses.

Match Assets to Needs

Different assets accommodate different needs. To ensure that your investments align with your financial goals, such as retirement age or retirement amount, you should be matching your asset portfolio to those needs.

For example, if you need funds at a specific time, likely in the short-term, investing in assets like CDs provides a fixed schedule and return that you can rely on, whereas investments like stocks are indefinite and will change over time, making them a less reliable source of income in the short-term, but a better strategy for the long-term.

As baby boomers near retirement age, reviewing investments and strategy becomes a crucial component of retirement planning. Having experienced market highs and lows throughout your career, knowing what you’re up against in today’s volatile market will help you plan for the future. Take time to sit down with a financial advisor to review your plans and projections, and make adjustments where needed.

Retirement is coming, and with proper planning, you can protect yourself financially today, tomorrow, and for years to come.

Related: How to Boost Retirement Savings in Your 50s

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