5 Tips On How To Protect Your Retirement Savings From A Crash

5 Tips On How To Protect Your Retirement Savings From A Crash

how to protect your retirement savings from a crash

The coronavirus health threat has been frightening to contend with, but the economic fallout from the pandemic is equally nerve-wracking. The stock market has fluctuated wildly in recent weeks, with multiple days of deep plunges. If the majority of your retirement savings is invested in the stock market, this is a great time to assess your current financial situation. After all, beyond unexpected events like a pandemic, cyclical events such as recessions can threaten your retirement nest egg as well. Taking prudent steps now could help you minimize the risk to your retirement savings and optimize its growth. Here are five great tips on how to protect your retirement savings from a crash.

1. Play the Long Game

In most cases, unless you’re very close to retirement, you should plan to keep a significant portion of your retirement savings in the market. This is definitely the case if you’re younger, or you have several more years of working and saving before you plan to retire. There’s a simple reason for this: most economic downturns don’t last long, and the stock market, in particular, has proven quite resilient over time. Historically, after any major market downturn of 10% or more, stock prices return to their pre-downturn levels in about four months. Therefore, if you play the long game and avoid the urge to bolt when the markets are spiraling down, you have a better chance of reaching your financial retirement goals.

2. Factor in Safer Investments

While staying in the market is important for building your retirement savings over time, one way to help insulate against a crash is to include some form of guaranteed savings in your retirement planning. A diversified retirement portfolio that factors in certain forms of guaranteed income will help keep economic uncertainty at bay in retirement, as well as while you’re still working and saving. Social Security is probably the best example of guaranteed retirement income. However, annuities and cash value permanent life insurance are other options you can consider. All these options can help ensure you have consistent cash flow when you stop working, regardless of the stock market.

3. Get Rid of Debt

Another way to protect your retirement savings from a crash is to eliminate as much debt as possible. If you retire with high debt levels, a significant portion of your retirement savings will have to be allocated toward monthly debt payments. If your retirement account loses value due to a recession or some other significant event, having low levels of debt will help to mitigate the impact of any losses you’ve incurred. If you’re currently concerned about the high level of debt you’re carrying as retirement approaches, consider contacting the team at National Debt Relief. Our debt settlement services may be a great fit for your current situation and could help you enter retirement debt-free.

4. Keep Cash on Hand

As your retirement draws closer, you should also begin building your cash savings. If possible, have enough cash on hand to cover up to two years’ worth of your expected costs of living in retirement. Having significant amounts of cash available will help you address many of your immediate spending needs upon entry into retirement. Additionally, if your retirement investments take a beating due to some sort of economic downturn, having cash on hand will help ensure you can address all your essential day-to-day living expenses, and give you peace of mind. Finally, since most recessions only last a few years, substantial cash savings will help you weather the downturn until the stock market, and your retirement investments, bounce back.

5. Get Help

When it comes to planning for your retirement, don’t go it alone. Find a trusted financial adviser who can guide you through the process and help you achieve your goals. A good financial adviser will help you determine exactly how much money you’ll need to live the kind of retirement you’re dreaming of and assist you with setting up an investment plan to meet your goals. A good adviser can also help you develop an investment strategy to better insulate your retirement investments from the major fluctuations occurring right now in the stock market due to the coronavirus pandemic.

Don’t Lose It all in a Crash

Mitigating the effects of a recession or some unforeseen event is a critical part of planning for retirement. Failing to do so can leave you in a bind when you reach the day you plan to stop working. However, if you consider the great tips offered here, you can steer clear of risk and optimize the value of your retirement investments. These tips can also give you peace of mind that you’ll be able to realize the retirement you’d planned. So, if you haven’t thought about how to protect your retirement savings from a crash, start doing so today.