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Guard Your Retirement From a Volatile Stock Market

In 2018, the stock market seemed to experience the sort of volatility that can worry investors. Five of the 10 biggest one-day gains in the Dow Jones Industrial Average history occurred during the year — but the market also saw a one-day 500-point decline more than once.

The S&P 500 Index went from great highs (the first time ever topping 2,900) to lows (suffering its largest annual loss since 2008).

This volatility is hardly unusual, as it turns out. Investors need to know how to weather these periods, especially if they want to protect their retirement funds. If you plan to retire soon, a bear market may worry you while you rejoice during a bull market.

The truth is, you need to protect yourself regardless of how the stock market is trending. Here are a few things to keep in mind to protect your money and your retirement.

1. Avoid Panic-Induced Sell-Offs

Reacting to every blip in the stock market will give you an ulcer. Chances are you will experience a crash if you retire now or 20 years from now—there have been four major crashes just within the past 30 years.

But responding to market volatility often means you sell when your stocks have decreased in value, netting you a loss. The market will recover eventually. Have the patience to stick with these diving stocks until then.

2. Shift Your Assets

Pre-retirement, you wanted to diversify your portfolio to prepare for retirement. As you near that age, you want income that will last for decades. If you retire in your 60s, you could need three more decades of retirement income to draw on.

Consider switching some of your assets to “safer” investments immune to the ups and downs of the stock market. These might include savings accounts and bonds.

You want to rely on a combination of your assets to provide your retirement income, and you want much of that independent of the stock market. These sources might include:

These sources should cover your basic living expenses in retirement, such as food, housing, medical bills and utilities.

3. Start an Emergency Fund

While you can still keep some of your money in more volatile assets like the stock market, with your dividends going toward fun splurges such as vacations, you want to be prepared should something unexpected happen.

Begin funneling money into a retirement emergency fund that will cover any sudden expenses, such as medical bills or repairs for an aging house. This money should be separate from your everyday living expenses and all but untouchable until you experience a true emergency.

Stock market volatility is a fact of life. Prepare for it, embrace it, and outsmart it, and your retirement funds will not suffer. Need guidance in your planning? Reach out to Jay to get more information.

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