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Nearing Retirement? Ensure Your Risk Management Considers This Possibility!

If you’re nearing retirement and watching the stock market, you may want to adjust your investment portfolio. Long-term equities deliver the best return despite their volatility. A lengthy market collapse might be challenging if you expect to retire and live off your money. According to research, this might affect your portfolio long-term. Spreading your investments may reduce this risk. The situation in Ukraine, rising inflation, and increases in interest rates have all contributed to a decrease in the indexes. By Friday’s lunchtime, the S&P 500 Index, which is used to measure the performance of corporations in the US, had dropped by 10%. The Dow Jones Industrial Average is now trading at a loss of 6.5%. At the same time, the Nasdaq Composite is currently trading at a loss of 18%. The S&P 500 index had a gain of 4.1%, while the Dow experienced an increase of 1.1%. However, Nasdaq experienced a loss of 6.1%. The future of the market is uncertain and very turbulent. Long-term investors, those whose retirement is still many years or decades away, tend to suffer less from the ups and downs of the stock market. The retirement years are transformative. This could be challenging for someone just starting. Your portfolio’s performance might suffer if it experiences a “sequence of returns.” The order in which you suffer losses or realize profits affects the consequences of your asset liquidation. The graph displays both losses and gains experienced by the early retirement market. Both investment portfolios have the same assets and annual returns. However, one of the portfolios is invested in the other direction for over 25 years. Even if two hypothetical investment portfolios had the same yearly returns but were invested in the opposite order, the outcomes may still be significantly different from one another. If you want to retire shortly, you should evaluate the sequencing risk of your portfolio. When it comes to spending money, this means staying away from stocks and other high-risk assets. To avoid selling during a bear market, several financial consultants recommend keeping one or two years’ worth of liquid assets on hand. The director of wealth planning at Fidelity Investments suggested that customers maintain an appropriate amount of liquid assets. Do not attempt it when the economy is in a slump. To determine how much cash you need, you must first be aware of your income, expenses, and overall financial condition. Be careful not to put too much of your money into stocks and cash. Cash flow is a concern for McClanahan’s retirees, so they make investments with a five-year time horizon. McClanahan said a terrible market isn’t required. New retirees with limited assets were the target audience for her recommendation to invest equally in bonds and equities.
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I advocate for federal employees making the best benefit and retirement decisions for their unique situations. After a 25 year career in personal banking I saw a need for financial education and retirement planning for those approaching retirement. In recent years I have focused primarily on federal employee from both the CSRS & FERS systems. These federal employee face challenges in getting the information they need to make the best decisions for creating a successful retirement plan. I assist these individuals in navigating the retirement process.

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