Cortburg Speaks Retirement

How to Protect Your Retirement from Market Volatility | Financial Planning Tips

• Miguel Gonzalez, MBA, AIF®, CPFA®, CRC® • Season 2024 • Episode 211

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 Learn how to safeguard your retirement savings during market downturns with expert advice from Miguel Gonzalez, Certified Retirement Counselor. Discover strategies for building a cash cushion and balancing investments effectively. 

Cortburg Retirement Advisors is a boutique financial planning firm committed to helping you grow, protect, and preserve your assets from your first job to retirement. We specialize in wealth management, estate and tax planning, group retirement, employee benefits, insurance, and retirement planning to navigate any economic climate.

Miguel Gonzalez, a Retirement Specialist with 20+ years of experience, offers expertise in retirement income planning, investment management, and retirement plan design. With an MBA from Columbia Business School, and professional experience with JP Morgan Chase, Merrill Lynch, and more, Miguel is a trusted advisor for his clients.

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with Miguel Gonzalez, MBA, AIF®, CPFA®, CRC®

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Welcome to Cortburg Speaks Retirement

An audio podcast about investing in the stock market, financial planning, money management and retirement planning.  Each Wednesday, we help investors at all stages of life learn how to potentially grow and preserve their money from first job through retirement.

Now here is your host, Miguel Gonzalez.

Good morning and welcome to the CORTBURG SPEAKS RETIREMENT audio podcast.   

Big swings in the stock markets can hurt your retirement savings, but there may be ways for you to stay on track to meet your goals.

A recent survey from MetLife found that nearly 70% of plan sponsors, who offer retirement plans such as 401(k)s, were concerned about participants’ abilities to weather market volatility. 61% of sponsors were worried about participants’ who were already retired.

Although the stock market has generally climbed higher in the past two years, negative returns plagued the market in 2022. If this happens, it’s important not to panic and initiate a sell-off, according to Rob Williams, Managing Director of Financial Planning at Charles Schwab. Doing so could result in missing out on investment gains once the market recovers.

A Cushion Of Savings Can Help Avoid Panic

In order to avoid a panic sell-off, experts recommend that current retirees have between three and five year’s worth of living expenses in cash, cash-equivalents, and short-term investments. 

That lines up with how the stock market behaves. According to Schwab research, from the 1960s to 2021, it has, on average, taken around three and a half years for a diversified index of stocks recover after a downturn.

“Retirees should have what we call a war chest of cash and bonds that would allow them to fund their living expenses for somewhere between two and five years,” says Taylor Schulte, a CFP and founder of Define Financial. “I know that's a big range, but it kind of depends on how much risk the client wants to take.”

Williams recommends retirees set aside a year's worth of expenses in cash or cash-equivalents, like a money market fund or high-yield savings account for the more immediate needs. Additionally, he recommends having 2 to 4 years worth of expenses in short-term investments like short-term bonds, short-term bond mutual funds, exchange traded funds, or even a CD ladder.

If you’re not retired yet though, you still have time on your side. According to the MetLife survey, only 40% of sponsors were concerned about participants’ who were more than 10 years out from retirement. 

"That risk of a sudden drop in the market, if you're very heavily invested in stocks, is much riskier when you're close to or in the early years of retirement than it is if you're in you're 30s or 40s," says Williams. "You can also benefit from a down market because you're putting money into your portfolio and you're buying into the market at lower prices."

Which Assets Should You Tap First In An Emergency?

Retirees who don't have short-term savings may have no other option but to tap their investment accounts. If they do, Williams favors withdrawing interest or dividend income first.

However, Schulte prefers to reinvest dividends whenever possible.He recommends focusing on building up that cash cushion over time.

For example, if you wanted to build up your cash and short-term investments over the course of 18 months, Schulte suggests selling off some of your investments, every quarter, until you have the amount of cash and short-term savings that you were aiming for.

Both Williams and Schulte strongly encourage retirees to periodically rebalance their portfolios based on their financial goals. If your portfolio becomes overrepresented or underrepresented in one asset class due to market volatility, you may consider buying or selling certain assets to return the portfolio to it's target allocation.

"The market will tell you when to reposition that money," says Williams. "If the stock market has gone up, you might buy more bonds. If the bond market has gone up, you may be tapping some of that to rebalance and go back to the stock market."

Make sure to visit our website, www.CortburgRetirement.com. Our site is filled with educational videos, eBooks, publications, and financial calculators designed to help you learn more about your finances.  As you search our site, send us a note regarding any questions you may have about any particular investment concepts or products. We will get back to you quickly with a thoughtful answer.

This is Miguel Gonzalez, Certified Retirement Counselor (CRC) and Managing Partner, with Cortburg Retirement Advisors signing off for this week’s educational podcast.  

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Miguel Gonzalez, MBA, AIF®, CPFA®, PPC®, CRC®

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