Finance professionals will tell you that some the most volatile stock market days are those from September to Election Day (November 5th) so investors are buckling up for the ride. For American seniors, who may have a fixed or reduced income than in prior years, it can be particularly tough to watch investments and retirement accounts bounce around.
So, what’s the best way for seniors to ride out a bear market?
AARP offers some practical advice.
- If you’re 50 and eyeing retirement in 15 years, stick to your 401(k) or IRA contributions. Bear markets average three-and-a-half years to recover, so keep investing regularly — you’re buying stocks at lower prices now to sell them high later.
- For retirees, avoid withdrawing from stock funds during a bear market unless absolutely necessary. Withdrawing when your stock fund is down only compounds your losses.
- Adopt a “bucket plan” approach. Put investments in three buckets – ultra safe (bank CDs & money market funds), moderate risk (bond funds) and high risk (stock funds). This strategy helps you weather the storm without locking in losses, keeping you prepared for the market’s upswing.
- Use cash investments for withdrawals. You can replenish the cash or bond accounts when the stock funds recover.
If you’re concerned or have questions, consult a professional financial advisor who can help guide you the turbulent times.
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