Market Cycles and Your Retirement: What You Need to Know

Scott Sullivan |
Categories
Retirement Planning

In our previous emails, we've discussed how a connected view of saving and spending can strengthen your retirement plan. Today, we're diving into another big piece of the puzzle: the stock market.

Market ups and downs are a natural part of investing. But it's common to wonder: Does the stock market affect my retirement? The answer is a clear yes, but not always in the way you might think. How market cycles impact your retirement depends a lot on your plan, your age, and your comfort level with risk.

The Impact of Market Cycles

When the market is booming, it feels great to see your investments grow. But when it dips, concern can quickly set in. This is especially true for those nearing or in retirement, leading to questions like:

  • Should I take my money out of the stock market when I retire?
  • Should a 70-year-old get out of the stock market?

It's tempting to pull your money out when things get shaky, or as you get older. However, a blanket "yes" or "no" doesn't fit everyone. Staying invested, even with a more conservative approach, can be crucial for making your money last through a long retirement. This is because inflation gradually eats away at the buying power of cash, and growth from investments can help offset that.Beyond Simple Rules: 

The "$1,000 a Month Rule"

You might have heard of simple rules like: "What is the $1,000 a month rule for retirement?" This often refers to the idea that you'd need $240,000 ($1,000/month x 12 months/year x 20 years) to support a $1,000 monthly income for 20 years without any growth. While easy to grasp, rules like these usually don't consider real-world factors like inflation, taxes, or continued investment growth.

Instead of relying on oversimplified rules or reacting to short-term market swings, a personalized strategy is key. This strategy should consider your specific financial goals, your comfort with risk (remember your RISA® Profile?), and your time horizon.

Building a Resilient Retirement Plan

An effective retirement plan acknowledges market cycles without panicking during them. It often includes:

  • Diversification: Spreading your investments across different types of assets to reduce risk.

  • Regular Rebalancing: Adjusting your portfolio periodically to maintain your desired risk level.

  • A Clear Income Strategy: Knowing how you'll generate income from your investments in retirement, regardless of market conditions.

The goal isn't to avoid the market, but to navigate it wisely so your money can continue to work for you.

Ready to discuss how market cycles might impact your retirement plan, and build a strategy that gives you confidence?

Click here to schedule your 15-minute Retirement Fit Call.

We'll help you feel more confident about where you're going—and how you'll get there.

To your confident retirement.