Will Your Retirement Savings Last as Long as You Live?
Are you near retirement or recently retired? Are you unsure if your retirement savings will last for as long as you live? Has the value of your 401k retirement plan or IRA account gone down? Are you concerned about how market volatility may affect your income during retirement?
If you’ve recently retired, market volatility resulting in short-term losses during the first few years of your retirement can permanently reduce the lifespan of your portfolio. You see, when most people retire, they start taking money out of their retirement accounts, such as a 401(k) plan or IRA account (IRA). In a portfolio where there are periodic withdrawals and no money going back in, even a short-term market decline can cut the lifespan of your portfolio in half. Although the market will eventually recover, you would need significantly higher returns in the future just to regain your previous losses.
When you retire, the focus changes from accumulation – building wealth - to distribution – or retirement income planning. You have to understand how market volatility resulting in short-term losses can affect your retirement plan once you start taking money out. Basically, what you have to know is that a loss due to downward fluctuations in the equity markets is always permanent during the distribution phase.
Fortunately, there are strategies you can use to regain some of your losses and still secure a retirement income for the rest of your life. You will have to consider your time horizon, the portfolio growth rate, the value of your retirement accounts at retirement and your planned systematic withdrawals. Risk tolerance is another factor.
If you
are concerned about how a decline in your 401k plan or IRA account may
affect your retirement plan and if you live in Pittsburgh (or nearby),
call us at 724-228-3440 during normal office hours to arrange your
initial consultation with a CFP practitioner. We will help you rebuild
your portfolio and implement a strategy to make sure that your
retirement savings will last for as long as you live.
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from Retirement Savings to Retirement Planning
