Recent events have everyone wondering when a sense of normalcy will return. But the answer isn’t as simple as hoping for a date when stay-at-home orders will be lifted. No one knows if there is a long recession to come, or if the economy will bounce back in the near future. Although things may seem uncertain today, it’s important to be aware of how the economic shutdown could potentially affect you in the long term.
Less Time to Recover from Losses
In the event of market loss, you could potentially find yourself waiting longer than you’d like to recuperate your investments. For example, the S&P 500 stock index lost more than half of its value from late 2007 to 2009. But investors who rode out the downturn made up for their losses in the following 12-year bull market. While this might describe you, you should consider whether you’re prepared to spend another 12 years to recover from the losses this time around. You may be thinking about changing your investment approach as you near and enter retirement.
A New Retirement Date
When there is a market downturn, many workers nearing retirement may worry that they’ll have to work longer than they planned. This could be a reality for those who are hit hard by a market downturn and weren’t prepared with a plan to mitigate risk. However, a potentially less ideal reality could be an earlier retirement: A recent survey found that more than 4 in 10 retirees retire earlier than they expected. This could be due to job loss, health problems, or caregiving responsibilities. Unfortunately, it is often harder for workers over 50 to find another job than it is for younger workers, which means that delaying retirement may not be a reliable backup plan.
What Can You Do?
Take a Long-Term View
Taking a long-term view of your finances may help you avoid making decisions based on panic. It also means planning for a long retirement. 49% of Americans say running out of money is their primary retirement concern, according to a recent study. This makes sense, considering that average lifespans have been steadily increasing for decades. You might decide to focus on making sure your savings will last the rest of your life, regardless of what happens with the markets in the next few decades. Defining your risk tolerance and future goals are some questions a financial advisor can help you answer.
Make A Plan and Adapt It If Necessary
Retirees don’t have to passively sit back and hope that the market acts in their favor. If you’ve saved and built your wealth over the decades, you have options for how to fund your retirement. Replacing a paycheck and helping ensure you don’t run out of money are straightforward goals, but they can be difficult to achieve without the right plan. A financial advisor can help you develop a comprehensive retirement plan based on your unique financial situation. Recent events may have affected you, but there are things you can do about it to help keep yourself financially on track for the long term.