You’ve worked incredibly hard to save for retirement. Perhaps you will depend on your 401(k) or other market-based retirement accounts as your main source of income during retirement. Like many Americans, you may have concerns about the volatility of the stock market. The Wall Street community has been in a state of shock after the S&P 500 plunged 10 percent in four sessions in the beginning of March, in large part due to the threat of the coronavirus. How will the volatility in the market affect estate planning?
1. Keep Investing and Saving Through Volatile and Bear Markets
When the markets drop, many of us tend to stop or lower the amount that we invest in our retirement. When the future of the market seems particularly uncertain, pulling back can be tempting. However, “buying low” in a down market can be beneficial. You’ll automatically be purchasing stocks when they are priced low. Of course, no investment decision is perfectly safe. However, adding money to the market and waiting is often a great strategy in bear and bull markets. Many experts warn that making hasty decisions doesn’t always benefit clients in the long run.
2. Consider Adding Alternative Investments
Investment decisions often depend on multiple factors, including your age, income, and whether or not you’re close to retirement. Are you approaching retirement? If so, adding alternative investments may help you in the long run. Alternative investments outside of the stock market can act as a sort of shock absorber when the stock market experiences a downturn. Alternative investments include all of the following:
- Real estate
- Gold and silver
- Venture capital
- Private equity
Alternative investments can provide balance in a way that evens out your investment returns over time.
3. Balance Your Need for Growth with Your Need for Financial Stability
Finding the balance between investment growth and financial security is easier said than done. For those nearing retirement age, you may want to consider investing the money you plan to use as income conservatively. Invest the money you’ll need to access soon in liquid vehicles that you can access quickly and easily.
Also, keep in mind that retirement could last anywhere from 10 to even 40 years. You’ll need your investments to continue to produce income. If you have income that you won’t need for a while, consider placing that income in more aggressive investments. Doing so can help you keep earning, even with the risk of inflation.
4. Investing in a Volatile Market When Retired
If you’re already retired, taking unnecessary risks with your stock market portfolio can be dangerous. Retirees are essentially long term investors. If you’re newly retired, you could be in retirement for thirty to forty years. Thus, your stock markets will have time to withstand some market moves. You may benefit from focusing your stock market portfolio on higher-quality stocks that have stable performance over the years.
5. Speak to Experienced Southeastern Massachusetts Estate Planners
A volatile market can have a significant effect on your estate plan. Fluctuations in the stock market can cause problems. Some of your beneficiaries may be happy to receive property, while others may prefer cash because of the property tax. If your cash assets are in decline due to the volatile market, you may benefit from re-evaluating your estate plan with a skilled lawyer.
At Surprenant & Beneski, PC, we have extensive experience helping clients create estate plans that will survive market fluctuations. Our legal team focuses on helping our clients meet their long term goals through careful planning. Contact one of our Southeastern Massachusetts offices today to schedule your initial consultation to discuss your estate plan.