With the economy on shaky ground and recent market losses adding to the uncertainty, planning for retirement in this recession has been a growing concern. To help alleviate confusion from wavering forecasts, here is sound advice on how to plan for retirement during these times:
- Don’t try to time when the market will rebound. Pulling all of your money out of the market is taking a big risk that could quickly result in disappointment, especially since some of the biggest gains in the stock market haven’t been far behind major losses. If you don’t have money invested when the market experiences an uptick, you could miss out on regaining your losses or adding to your investments.
- Carefully assess risk levels and choose the level that best fits your situation. Evaluate your situation as a whole as opposed to focusing on parts of your overall situation that may be currently affected by the economy. When selecting a risk level, consider your age and length of time you desire to invest before retirement. If you’re in your low-30s and anticipate a long investment timeline, you are in a more comfortable position to take higher risks. As you get closer to your retirement goal, consider a more conservative mix of funds.
- Take advantage of the matching program your company offers as part of its 401(k) plan—even if your company has reduced its match during this economic downturn. Most companies match a portion of every dollar you invest up to a certain percentage of your pay. If you don’t participate when your eligibility begins or if you don’t contribute the minimum amount for your company to match your investment, then you’re missing an opportunity to make more money that requires virtually no effort on your part.
- Try to avoid dipping into your retirement funds. Even though borrowing from a retirement account may seem like the best option at the time, try to refrain from withdrawing any funds. The penalty fees can be high and add to the setback that is created when funds are borrowed. As an alternative, think of ways you can cut costs and incorporate those in your daily living routine.
- Entrust a professional to oversee your investments. This way, you have someone who closely follows the performance of the stock market to give you recommendations on what your investment portfolio should comprise in order to garner substantial benefits and build a healthy nest egg. With the volatility of the market making investment decisions harder to make, delegating your retirement planning to a professional can result in a more rewarding plan and give you more peace of mind.
As long as you stay informed on the economic indicators that affect your plans and consider plausible options for building your nest egg, planning for retirement will be more manageable.
