MULTIZ321
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How to Protect a Retirement Plan in a Down Market
From Dow Jones Newswires/ Retirement Planning/ Fox Business/ foxbusiness.com
"Market corrections are a worry for all investors, but they can pose a particularly big problem for people who have just retired and are starting to dip into savings.
Each time retirees sell stock, it digs a hole out of which their portfolio must climb to keep producing the same amount of income over time. The more they sell -- and the earlier -- the deeper the hole.
This doesn't mean it's always bad for a retiree to sell stock. Selling when the market is strong can be not only profitable but responsible, especially as a way of keeping portfolio allocations in line with investment goals. Selling during a correction, however, when stock prices may have fallen to a fraction of their recent market value, not only might yield a lot less return per share, it could cause a retiree to run low on resources sooner than expected.
"If you get off course at the beginning, it could be very difficult to recover," says Dan Keady, chief financial planning strategist at New York-based financial services firm TIAA.
Despite recurring volatility, most retirees must hold some stocks to keep pace with inflation. For those investors in particular, it's important to have a Plan B to cover ongoing financial needs so that if stocks crater, the retiree can avoid being forced to sell shares at depressed levels.
Mr. Keady recommends being proactive and taking steps ahead of retirement, like projecting spending needs, matching them against expected income and creating a reserve with something other than equities to help cover shortfalls. Being better prepared also might include planning ways to cut spending.
Here are some thoughts and suggestions from advisers and planners on how to minimize the risk:...."
(AP Photo/Damian Dovarganes)
Richard
From Dow Jones Newswires/ Retirement Planning/ Fox Business/ foxbusiness.com
"Market corrections are a worry for all investors, but they can pose a particularly big problem for people who have just retired and are starting to dip into savings.
Each time retirees sell stock, it digs a hole out of which their portfolio must climb to keep producing the same amount of income over time. The more they sell -- and the earlier -- the deeper the hole.
This doesn't mean it's always bad for a retiree to sell stock. Selling when the market is strong can be not only profitable but responsible, especially as a way of keeping portfolio allocations in line with investment goals. Selling during a correction, however, when stock prices may have fallen to a fraction of their recent market value, not only might yield a lot less return per share, it could cause a retiree to run low on resources sooner than expected.
"If you get off course at the beginning, it could be very difficult to recover," says Dan Keady, chief financial planning strategist at New York-based financial services firm TIAA.
Despite recurring volatility, most retirees must hold some stocks to keep pace with inflation. For those investors in particular, it's important to have a Plan B to cover ongoing financial needs so that if stocks crater, the retiree can avoid being forced to sell shares at depressed levels.
Mr. Keady recommends being proactive and taking steps ahead of retirement, like projecting spending needs, matching them against expected income and creating a reserve with something other than equities to help cover shortfalls. Being better prepared also might include planning ways to cut spending.
Here are some thoughts and suggestions from advisers and planners on how to minimize the risk:...."
(AP Photo/Damian Dovarganes)
Richard
