Retirement Hacks: The one question to ask yourself about your 401(k) when stock indexes are dropping

by | Sep 24, 2022 | Stock Market

With the Dow
S&P 500
and Nasdaq
indexes dipping into the red right now, looking at your retirement portfolio may have your heart racing.  Retirement Tip of the Week: Advisers typically advise their clients and all individuals to remain calm during market volatility, but that’s easier said than done when you see your hard-earned dollars trending downward. Don’t make any drastic moves, but do take stock of your feelings during this event – then be ready to talk about it. 

Panicking and making any sudden changes to your portfolio won’t help your retirement savings – in many cases, doing so would actually hurt your future prospects. It’s important to remember that while it looks like you’ve lost money during a market downturn, that actually isn’t the case unless you were to withdraw or make extreme shifts to your asset allocation. When you sell during a downturn, you’re making those losses official.  See: Whether you’re retiring 30 years or 5 years, you still need to do this one thing religiously  Still, sitting there and watching the numbers tick down in bright red isn’t exactly calming, and not always avoidable to watch. Although advisers often suggest individuals not check their accounts too often – especially when the market is acting up – it isn’t always an option for someone sensitive to these fluctuations.  While you shouldn’t make any actual changes suddenly, write down how you’re feeling during this moment and take note of how much of your portfolio has been “lost” to the downturn. For example, if you have a $1 million portfolio and have lost $10,000, that’s 1% of your portfolio. This will be an important talking point when the market stabilizes and you have your next conversation with a financial adviser.  Ask yourself: How am I feeling right now? How would I feel if my account balance were to bounce back in just a day or two? What would I most likely feel if it were to stay this way for a while? Can I remain calm in the future during a downturn or do I need to change how much risk my portfolio actually has?  Portfolios are created with numerous variables in mind, such as time horizon and target amount, but they aren’t always created during moments of market volatility. For more than a decade, the markets have been trending mostly upwa …

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