– Originally posted 08/24/2015 –
It finally happened….
The 10% market correction the financial pundits have been clamoring about for years finally arrived this week.
What does this mean for your retirement plan? Where will you take investment income next month? When will the market come back? How long will this downturn last?
What is a retiree to do in these markets?
The time to decide “What do we do now?” is not when the markets are in turmoil.
Your retirement deserves a plan for good markets as well as bad. If you are approaching retirement, you could expect to see dozens of “corrections” and “bear markets” over the next thirty years of your investment timeline.
The market doesn’t always act rationally.
Sometimes the market goes up for no reason, sometimes the market goes down for no reason. We cannot control the magnitude or frequency of portfolio returns.
The only thing we can really control is our own behavior.
This means having a well thought-out retirement income strategy BEFORE the market misbehaves, and sticking to this strategy once the inevitable crisis occurs. This doesn’t mean purchasing some expensive guarantee, or shoving cash into your mattress. We can survive what the market throws at us by sticking to a plan, and holding unexciting (even downright boring) investments in our portfolio.
It was difficult to keep a small portion of boring investments over the last five years while the market went up nearly 200%, but give the market long enough and we will always be reminded why diversification is our saving grace.
While we are always optimistic about the market long term, deciding what to sell for investment income in a crisis can induce hair-pulling. Today’s retiree needs to have a plan ahead of time.
***Nothing in the article should be deemed individual investment advice. Each client has their own unique circumstances, which need to be accounted for. ***