Near retirement and loss of money 401 (K)? What not to do – Deseret News

The stock market has climbed like a russian mountain car crawling towards the top of a steep hill. And also like that sometimes frightening, speculation on and then the details of President Donald Trump’s prices made it fall down on what for some could be a ride ride.

In recent weeks, the world’s stock markets have eliminated $ 6.4 billions of value.

When day after day, the stock market is down, it does not look like good news for people invested in a 401 (K), although most people have a lot of time to recover from a market that has been volatile before and will be again.

But what should you do if you are or near the retirement age and this fund is the foundation of your hopes and dreams for a happy and unemployed future?

“In the past two weeks, we have noticed a really increased market volatility,” said Brad Herdt, certified financial planner from the Mutual Benefit Association. “We have seen a lot of stockings recently and for people approaching retirement or get closer to start using their retirement savings, this can be a little scary, because these tops and the stockings are a little more substantial.”

However, he said, don’t panic. He suggests reflecting on your goals and if you already have financial plans in place to accomplish them. “What is the plan?” Market volatility is not a reason to abandon the course. ”

“If you look at the story, there has never been a lowering market that has not been followed by a bull market. Never, ”adds his colleague, Shon Eckert, also a certified financial planner at DMBA.

“It is completely normal to feel uncomfortable during the constraint of the market. The key is to stay as emotion as possible. Any decision that someone takes, whether during periods of euphoria or pessimism, are generally not the best decisions, nor to the best overall results of Raymond James and Associates.

If you have a well -diverse portfolio managed by professionals, which most people with a 401 (K), stick to the plan, said Herdt – especially if retirement is looming. “Ideally, we should already be positioned in a way that we are going to resist the storm.”

Those who are most at risk are those who have not planned and simply decided that the stock market is doing very well, so they chose to go and were too aggressive. He called this a two -sharp sword, with the potential of big gains but also large losses.

Herdt said that these people may have to decide if they want to make changes to diversify now and accept what they recently lost so that they can sleep at night and develop a better strategy in the future or if they prefer to turn off what, hopefully, will be a short slowdown, then make sure they create a more solid financial plan.

Eckert recalls the crash of the housing market. “When the real estate market crashed in 2007-2008, have you lacked and sold your home? No. It’s absurd. When the market drops and your shares are in lower value, why would you sell them? ”

Diversify investments

As people age, it is generally a good idea to put more investments in obligations, instead of simply focusing on shares, said Herdt. Many with fund managers have a target funds that automatically adapts as people age to see that the combination of shares and bonds is appropriate. This means that someone who is at 10 years from a planned retirement will have a higher share of bonds in their portfolio than someone who is in 30 years. And the share of obligations increases more as the retirement approaches.

According to Townsend, for those who are close to retirement, “is now the time to ensure that your wallet is properly balanced between growth and stability.

The more someone has to need their funds, the less a slowdown in the market is, he said. Herdt has cited statistics that suggest that a market slowdown 10% from top to bottom – “what we call a correction” – generally takes a few months to correct. And they occur about each year.

“Usually, the lower it goes, the longer it takes. But even on the very long end, we don’t really see them last longer than a few years,” he added.

What history says

Townsend said markets can feel chaotic in the short term, but history shows that they recover. “The key to success is to have a solid plan and stay with it through the ups and downs; This is how wealth is created. A large financial plan is built for storms, not just the sun. ”

There is no magic visualization device to see the future. The scope of the prices that Trump has announced is unprecedented. But the markets mounted other so-called first.

Although the past does not predict the future, that’s all we have to continue. And it’s a story full of hope.

Herdt said that we had not seen a world pandemic in the past 100 years and that the stock market has dropped. “People forget that we have struck what are called circuits, where they have literally ceased to negotiate on the scholarships; It was going too fast. We don’t have that now. Look still, we had a great financial crisis. We had never seen this before.

He added that “although this time could be different, we have no indication that a single market event results in a different result of the market for a long -term investor.”

Timely time

Age and even retirement are not the problems. On the contrary, what matters is when you start to need this money, Eckert said: “When you start spending money seriously and what is your life expectancy. If I retire in a few years, but I will be removed for 20 or 30 years and I don’t really need to start (using) my 401 (K) for 10 others, my chronology is 10 years instead of two to a minimum. “

If someone withdraws from their 401 (K) either in panic, or because they have put their money on a monetary market or a stable point of value to eliminate volatility and gain some interest, Eckert said that income did not follow the pace of inflation, instead of continuing to grow in a diversified portfolio.

“The idea is that you are probably supposed to stay there for the rest of your life despite the short -term volatility to be at least able to obtain the long -term average yield you need to go beyond inflation,” said Eckert.

“Those who are young, in mid-career or even at the end of their careers, but who will not need money for a while should kiss the slowdown in the market,” said Eckert, because he can actively contribute to your financial future. He calls it counter-intuitive but true that when equity prices drop, those who make investments buy more. Thus, those who remain in profit by having more stocks later when we hope that their value has increased.

Townsend also said that for long -term investors, “market corrections are often opportunities to buy future growth at reduced prices”.

“Don’t get out of it,” said Eckert about the market slide. “In fact, enter the opportunity, because this is what will offer your best long -term return over time: the investments you made when the market was broken.”

Adopt a thoughtful approach to change

Herdt noted that when people are worried, they can also be vulnerable to those who benefit from their fears.

“It is biological to panic when the markets drop. There are bad players in the financial services industry that will attack this, “he warned, urging people to be careful and skeptical before taking great steps.

Townsend and Herdt both suggest consulting a financial advisor who may consider your individual situation before making major decisions concerning investments, including what to do on the current volatile market.

And the trio notes that they are talking about trends, not giving individual advice in this story.