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If you've recently retired or are about to retire, you may be wondering how a down market might impact the plans you put in place. Can you still afford your lifestyle? Will you have to cut costs or go back to work, part time? While everyone's situation is different, here are some universal tips to navigating times of uncertainty.
Have your plans changed? A down market provides an opportunity for you to reexamine your goals. If your goals have not changed, you may find it makes the most sense to stay the course, but if your goals have changed, then more adjustments may need to be made. Either way, talk to your financial advisor to make sure your portfolio objective and asset allocation (mix of stocks and bonds) match your goals, income needs and comfort with risk.
A strategy is only as good as your ability to stick to it in both good times and bad. Periods of market decline are normal. We typically experience about a 20% decline in the markets every four years, so you could see five to 10 declines throughout your retirement.*
Down markets are the true measure of your comfort with risk. If you're feeling nervous or more risk-averse than you have in the past, talk to your financial advisor and adjust, if needed. That said, remember that risk and return go hand in hand, so it's important that your investment strategy aligns with the return you need to achieve your goals. You also may want to review your withdrawal rate and adjust your spending, since how much you withdraw from your portfolio has a major effect on ensuring your money lasts as long as you need it.
The thing you don't want to do is panic. You may not be able to control the markets or what's going on in the world, but you can control your emotions and these key strategies to staying on track: your goals and risk tolerance, your diversification, and your spending. Talk with your financial advisor before you take any action to discuss the strategies that might be right for you.
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