Tips for Navigating a Volatile Retirement

Michele Brigman-Pemberton |

Retirement is the time in your life when you want to sit back, relax, and enjoy the fruits of years of hard work. But unfortunately, when the market is volatile, it may bring additional anxiety and stress. The good news is, a volatile market does not necessarily spell disaster, and by following a few simple tips, you may be able to reduce anxiety as you navigate through these times.

Determine How Much Income You Have to Count On

It is unlikely that all of your retirement savings is linked directly to the markets. Oftentimes, retirement income will consist of investments, along with Social Security, or a pension income, with the latter two being sources of guaranteed income. Your guaranteed income should be enough to cover all essential spending, such as food, housing, transportation, and insurance. That way, when your other investment income may be down, you will have enough for your needed spending and will be able to push off non-essential needs to a later date.

Look at Your Stock-to-Bond Ratio

It is often common to reduce the risk of your financial portfolio in the early stages of your retirement. This is done to help you settle into your new retirement life and create a more stable foundation for your future retirement. Reducing the risk in your portfolio will often result in selling more stocks and buying more bonds, which could provide you with a lower risk investment if the market sees some fluctuation. Talk with a financial professional about your stock-to-bond ratio to determine if your long-term returns could help you with your retirement goals, while still providing some stability against volatility.

Keep an Eye on Your Taxes

When you begin the withdrawal process from your retirement accounts, it is important to know the taxes that you will face with these withdrawals at the end of the year. Different types of accounts have different tax statuses, so it is crucial to understand the tax process with each one. For example, some may allow you to enjoy tax-free distributions, while others may require income tax to be paid on the withdrawn funds. By being aware of how each of these funds is taxed, you will be able to appropriately manage how you make withdrawals with each account to help with the tax burden at the end of the year.

Follow the few tips above to help you confidently manage your retirement through periods of volatility.

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.

The information provided is not intended to be a substitute for specific individualized tax planning or legal advice. We suggest that you consult with a qualified tax or legal advisor.

All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

Investing in stock includes numerous specific risks including the fluctuation of dividends, loss of principal, and potential illiquidity of the investment in a falling market.

Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.

No strategy assures success or protects against loss.

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