|
|
: With the turbulence in the stock market over the past decade, many investors nearing retirement are wondering what this means for their future. In this month's newsletter, we'll explore options to pursue if you have recently retired or plan to retire in the near future. Don't forget that you can also keep up-to-date with our activities by becoming a "friend" on our Facebook page, joining us on LinkedIn or by following us on Twitter. |
|
Market Volatility & Your Retirement: Can Timing Alter Your Plans?
Investors
saving for long-term goals can usually overlook short-term market volatility in
the interest of long-term gain. But for retirees, who increasingly rely on
their investments to fund their living costs, market volatility can mean the
difference between living comfortably and just scraping by. In fact, retirees
are particularly vulnerable to market downturns, especially in the early years
of retirement, because of their dependence on portfolio income, their limited
investment horizon and their need to make sure their savings last throughout
their retirement.
Market Volatility
- An Historic Inevitability
Unfortunately,
the timing of market losses and gains is something that we cannot control. One
thing that history points out with certainty, however, is that over long
periods of time the stock
market has delivered positive returns on an average basis. But we also know
that in the shorter term, stocks fluctuate in response to many factors.
For
instance, through the market boom of the 1990s, personal investment portfolios
were swelling and the stock
market reached an all-time high. Then the bubble burst in the
technology/Internet sector, and many investors lost a significant portion of
their retirement savings. Similarly, the financial meltdown that has taken hold
over the past several months has had a dramatic impact on the retirement plans
of American workers as well as retirees. Those unlucky enough to be on the
brink of retirement - or those who have recently retired - will likely be
making significant adjustments to their retirement plans.
There
have been many other periods of decline throughout history - even though the
particular events that triggered them may have been different. And there will
no doubt be more periods of market decline in the future. Although market
fluctuations are a normal part of investing, they can still pose challenges to
investors, especially those entering or already in retirement.
Strategies for
Managing Market Volatility in Retirement
The
following strategies can't guarantee against losses, but they may be able to
ease the ups and downs in the market.
Keep withdrawal assumptions conservative. When calculating how
much of your retirement portfolio you can spend each year, be realistic:
The amount you have saved and the expected length of your retirement will
dictate the annual withdrawal amount. Using historical market performance
as a guide, retirement experts suggest withdrawing no more than 5% of a
portfolio's value each year. This approach may help maintain a cushion
against future market declines while supporting a hypothetical payout
schedule of 20 years or more.
Maintain a sensible asset
allocation. Divide your portfolio among stocks,
bonds
and cash investments so that you have adequate exposure to the long-term
growth potential that stocks provide, but also have some protection
against market setbacks. By spreading your assets across investments that
react differently to various market conditions, you help minimize the
impact that any single losing investment can have on your overall
portfolio performance.
In addition to traditional asset classes, investors
at higher income levels or with more investable assets may consider alternative
investments as a way to help further diversify a portfolio and manage risk.
Keep in mind that alternative investments may not be suitable for all investors
and should be considered as an investment for the risk capital portion of an
investor's portfolio. The strategies employed in the management of alternative
investments may accelerate the velocity of potential losses.
Review and rebalance your portfolio. Once you have set an
asset allocation that works for you, review, and if necessary, adjust it
from time to time to ensure that it still reflects your needs.
Fluctuations in the market may cause your asset mix to become too heavy in
stocks - which could expose your retirement nest egg to damaging, even
irreversible, setbacks when you are on the verge of retirement. Similarly,
as you grow older, you may want to "weight" your portfolio more
toward bonds, for their ability to produce income.
Stock
investing involves risk including the loss of principal. Bonds are
subject to
market and interest rate risk if sold prior to maturity. Bond values
will
decline as interest rates rise and are subject to availability and
changes in
price.
This article was prepared by
Standard & Poor's and is not intended to provide specific investment advice
or recommendations for any individual. Consult your financial advisor or me if
you have any questions.
|
| Our Free Monthly Conference Call
Our next webinar "Women and Investing" will be held on Tuesday, July 13th from 12:00pm - 1:00pm (EST). If you are interested in registering for the webinar, please call Loury Davis at 410-732-2637 or email loury.davis@lpl.com to reserve your space today.
By the way, these free monthly calls are not just for clients, they are designed to help anyone trying to better their financial situation. If you have someone in mind that could benefit from one of our calls, please have them contact Loury.
|
Office News 
Our office will be closed on Monday, July 5th in observance of Independence Day. We hope you have a safe and enjoyable holiday weekend.
Just a reminder! We are always accepting donations for the local animal shelters - toys, collars, leashes, food, cat litter, cardboard trays, office supplies, cleaning supplies, towels, mats, washcloths, etc. We will accept donations Monday-Friday between 8:30am & 4:30pm. |
On the Home Front 
We're looking forward to the 4th of July celebration at our friend's house just outside of Baltimore. Last year their neighbors were setting off professional quality fireworks to complement the wonderful display sponsored by the town. It was quite a show and Heidi and I can't wait to go back!
We're also looking forward to the LPL Financial annual conference. This year's conference is being held in Boston. Not only will we be traveling to one of my favorite cities, we'll also get to see my sister! The trip takes place in late July.
|
|
I hope you enjoyed this month's newsletter.
Best Wishes,
Woody Derricks President Phone: 410-732-2633 Toll Free: 877-807-2633 Fax: 410-732-2634 |
|
|
|
|
|
Follow Us on
Facebook, LinkedIn, & Twitter:
| |
Please note our new mailing address:
1819 Thames Street
Baltimore, MD 21231
|
|
|
Available by Appointment in Alexandria & DC.
Woody Derricks is also registered to discuss and transact securities business in:
AK, CA, CT, DC, DE, FL, IN, MD, NJ, NV, NY, PA, RI, TX, VA, and VT. |
|
|
|
|
|
