The Most Important Retirement Chart You’ve Ever Seen | Smart Change: Personal Finances

(Katie Brockman)

Planning for retirement isn’t easy, but it can be even harder when the stock market is volatile. If your savings have taken a hit over the past few months, this can be worrying if you’re preparing to retire soon.

However, market turbulence is not as daunting as it seems. While it can be difficult to retire during volatile times, there is an important chart that can ease your worries and help you better prepare for the future.

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How will the stock market affect your retirement?

Stock prices have fallen sharply in recent months, and the S&P500 Currently hovering near bear market territory. No one knows exactly how long this crisis will last or if the market will dip further before recovering.

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That said, the stock market’s long-term performance is much more predictable. Over the years, the market has been subject to countless large scale downturns, corrections and crashes. Still, he’s managed to recover from every one of them so far.

In the past two decades alone, it has seen the bursting of the dot-com bubble, the financial crisis and the Great Recession, and the pandemic-related crash of March 2020, as well as dozens of smaller downturns along the way. . Not only has it rebounded from these downturns, but it has also seen positive average returns over time.

If you’re worried about the impact of this recent downturn on your retirement, remember that the stock market will be eventually recover. In the most severe cases, it could take months or even years for stock prices to fully rebound. But things will get better.

As you plan, do your best to stay focused on the long term. The next few months could be rocky if the market continues its slide, but given enough time, it will recover.

How to protect your retirement savings

Stock market performance may be out of your control, but that doesn’t mean you can’t protect your savings as much as possible.

If you are approaching retirement, one step is to ensure that your asset allocation is appropriate for your age. As you age, your portfolio should begin to lean more towards bonds and less towards stocks. Conservative investments like bonds often generate lower returns than stocks, but they are also less affected by market downturns.

Also, try to avoid any knee-jerk reactions, such as withdrawing your money from the market. No matter how much stock prices fall, you technically don’t lose anything unless you sell your investments. Although it may seem counterintuitive, staying invested during volatile times can actually protect your money.

No one can say for sure how this downturn will play out or how long it could last. But it will get better eventually. By staying on course for the long term, you can ride out this storm and protect your nest egg as much as possible.

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