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How to Recover from a Market Crash if You're Retired Thumbnail

How to Recover from a Market Crash if You're Retired

If you're retired, you may be feeling more concerned about market volatility than others. When an economic upset occurs, the question becomes: what should you be doing next? Below we are discussing three things you can do to help recover from a market crash. 

#1: Review Your Financial Plan

Many of us are emotional about our money, and we can’t help it. That’s why working with an advisor who can offer an objective, logical approach to money management is often a necessary component in reaching our financial goals.

Watching the market crash, or seeing our stocks drop overnight, can cause panic - and understandably so. The first thing to do when faced head-on with a market downturn is to pause, take a breath and review the financial plan you and your advisor already have set in place. 

Oftentimes, advisors develop financial plans or investment strategies that prepare for the unexpected - whether it’s a market downturn, death in the family, loss of a job, etc. Turning to your advisor and reviewing your plan amidst a market crash can be a comforting first step in remembering not all is lost. Doing so can serve as a reminder that now is not the time to make hasty, emotionally-driven decisions. Rather, now is the time to focus on your personal economy and what you can do to rebuild or reallocate what you need throughout retirement.

#2: Re-balance And Reassess Your Risk

A market crash can serve as a true indication of your risk tolerance, meaning this could be an ideal opportunity to reassess your personal tolerance for risk. If you’re allocating assets in a similar manner as you were while working full-time, for example, you may find that re-balancing your portfolio is well past due. 

Alongside your financial advisor, look closely at your portfolio, specifically at the balance between stocks and bonds. At a time like this, it may be tempting to change your asset allocation in favor of more fixed income. And while that may be the right option, you want to be logical and confident in this decision, as removing risk altogether could mean missing out on crucial returns later down the line. As is true for most portfolios, yours is likely to contain a mix of fixed income and stocks.

#3: Adjust Your Budget 

You can’t control the market, but you can control other aspects of your financial life - including your spending and saving strategies. If you need to, take a look at your weekly or monthly budget and see where adjustments can be made. You don’t want to pull from your investments and/or sell your assets if minor lifestyle changes will suffice. Whether that means eating out less or reducing the number of trips you budget for each year, evaluate ways in which you can reallocate “fun” money to cover necessities. And as you do, remember to include contributing to your savings account or emergency fund as a top priority. 

 The Bottom Line

Knowing what to do when stocks go down is crucial because a market crash can be mentally and financially devastating, particularly for the retired investor. When a market crash occurs, it can feel like the future of your finances is out of your control,  and panic selling when the stock market is going down can hurt your portfolio instead of helping it. This is why it’s important to understand your risk tolerance, your time horizon, and how the market works during downturns.  But with DaVinci Capital Partners by your side, these steps can provide both a well-thought-out plan and peace of mind for your retirement. 

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.

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