Few ever feel ready for retirement, but tumbling stocks can shake the confidence of even the most prepared.
And with 2018 having been the market’s worst year in a decade, nobody could blame you for feeling like we’re on shaky ground.
Despite the stock market rally so far this year, it’s also possible the market could start to fall again — and drop even lower than where it was in the last week of 2018. Neither you nor any expert has a way to know for sure, so you may be strongly tempted to make a move. But should you?
That depends on your financial situation and your appetite for risk. Let’s talk it through, starting with the simplest and safest options and moving toward riskier and more complicated ones.
1. Work longer
The less you have to dip into your investments at what may be one of their lowest points, the more potential and time they have to recover.
That means if your health and situation allow, continuing to work is the safest step to take. It gives you an opportunity to keep growing your nest egg instead of raiding it.
Even if you can’t work full time, you may have more options than you realize — from taking on a project-based or consulting role at a previous employer to picking up part-time jobs that didn’t exist a few years ago.
Check out “19 Ways to Make Extra Money in Retirement” and consider a service like FlexJobs, a subscription-based jobs board that manually screens postings for work-from-home jobs and other flexible jobs.
2. Wait it out
This is the stock advice everyone hears during bad times: Sit tight and wait for the market to recover. People who panicked and sold right after Christmas are already wishing they’d listened.
Yes, your situation is more pressing than people who have several more years of work ahead of them. But to the extent you can, avoid touching your investments and otherwise proceed as planned with your retirement.
This is the simplest course if you’re not in a position to continue working or pick up work. It’ll go smoothest if you already have enough cash to cover a couple of years’ worth of living expenses.
If you’re not yet drawing Social Security and younger than 70, there’s one more big benefit of waiting: You can boost your monthly Social Security benefit.
Check out “Maximize Your Social Security” to learn how to obtain a personalized report on the best way to claim benefits.
3. Examine your portfolio
Reviewing your investments might give you the peace of mind you need to wait it out, or it might spur you to make some needed changes.
For a starting point, compare your current asset allocation with the rule of thumb Money Talks News founder Stacy Johnson often recommends.
As he explains it in “5 Mistakes That Will Ruin Your Investment Returns“:
“Start by subtracting your age from 100, then put no more than the resulting figure as a percentage of your long-term savings into stocks. So if you’re 25, 100 minus 25 equals 75 percent in stocks. If you’re 75, you’d only use stocks for 25 percent of your savings.”
Are you too heavily invested in stocks? Are you safely diversified in index funds, or dangerously concentrated in a sector that might get hit harder? What are the fees like on your accounts?
More importantly, what does your gut tell you about the possibility the market could drop by half, as it did during the Great Recession? Is that something you can handle?
These are questions you should be asking yourself regularly, and long before the economy sours.
To get step-by-step directions for scrutinizing your portfolio, check out “Year-End Review: Evaluate Your Retirement Accounts in 15 Minutes or Less.”