Ways on How to Protect Retirement Money from Market Volatility

The golden years, the years when you can finally put up your heels, spend some quality couch potato time, or chase after those hobbies you’ve been wanting to play with for years. Sounds great, right? It can be, but you need to prepare now in order to have the future you have always dreamed about. It’s times like we’re going through right now where the market is so extremely volatile, that everything should be all about protecting your investments.

How do I protect my nest egg?

The approaches are vast, but there are some basic rules you can live by in these times. These simple steps will help you protect what’s most important, your retirement money.

  1. Diversify your holdings. You’ve heard of the old saying, “Don’t keep all your eggs in one basket.” There’s a good reason for that. If you have all stocks and the stock market crashes, you’re out a serious boatload of cash. However, if you had stocks, maybe some real estate, and even certificates of deposit if the stock market crashes sure you’ll take a hit but you won’t lose everything.
  2. Keep a balanced portfolio. Don’t get too heavy on one thing. For instance, stocks can offer higher yields per dollar but are subject to the whims of the market but mutual funds are definitely a safer investment. Mutual funds are already diversified; they pool together securities from many sources making them a more stable investment. So, if you have more in stock, such as 60% and 40% in mutual funds, get that down to a more even level.
  3. Eliminate debt. It is difficult to eliminate debt in a country where the system is constantly conspiring to keep you in debt. It’s time to get rid of all the unnecessary waste. Limit yourself to one credit card if you absolutely have to have one and keep the balance paid at the end of the month. Pay off the rest and cancel the cards.
  4. Keep some cash on hand. A good rule of thumb is to keep three to five years’ worth of living expenses in easily convertible treasury bonds, certificates of deposit, or short-term bonds. Keeping it in a savings account is ok, but any of the above options will give you a higher ROI than a savings account.
  5. Refrain from cashing in some of your 401K. Cashing in on your retirement fund can get you out of the pit when it comes to paying the bills. But, it’s just not a good idea. Many times, withdrawals such as these come with hefty penalties and taxes, eating away at your hard-earned money. If you are in a position where there is no option, there is some hope. The government’s CARES Act (Coronavirus Aid, Relief and Economic Security Act), may offer you up to $100,000 in relief from penalties if you can provide proof that the withdrawal is directly related to the pandemic.

What types of securities are most stable in a volatile market?

Especially nearing retirement, you want your investments to be stable and secure. Some securities to think about are those with a proven history of stability and a high return on your investment.

  1. High-quality stocks. Be very choosy with your stocks. Look for solid stocks with a long history of delivering dependable ROI’s. This is no time to be chancy with your portfolio.
  2. Bonds. These can be a significant investment for retirement if you choose wisely. Bonds represent a loan to the issuer, providing you as the lender, a steady stream of interest coming in. Since you will get capital gains on these bonds, it’s best to keep them within a tax-sheltered environment such as an IRA.
  3. Fixed Annuities. What is a fixed annuity? It is also known as an income annuity, can be a brilliant plan to beef up your retirement income. You can purchase fixed annuities through an insurance provider or buying annuities online is another option. How an annuity works is this, these annuities are set for a predetermined contract period and deposited amount or you can set up monthly payment plans. At the end of the contract period when you are ready to retire, you receive monthly, yearly, or quarterly payments from the annuities until you pass away. This effectively gives you another income stream in your retirement years and more security. It will be important for you to thoroughly vet the insurance provider for longevity and financial stability.

Conclusion

Today’s market is very volatile and protecting your retirement investments should be a top priority. Don’t wait to protect your retirement assets! Diversify your assets and keep a good balance of stocks vs. bonds and real estate. Open yourself up to other possibilities for growth and diversity in bonds or fixed annuities. Since you are heading into your golden years, make sure that your nest egg is secure even in difficult economic times. 

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