The Chris Burns Show

How To Respond To the Market Drop When You're Near Retirement

Episode Summary

This week was a wake-up call to remind everyone nearing retirement that we don’t ever know what to expect. But how should you respond to a correction like we just saw?

Episode Notes

Over the last week we’ve experienced the largest market drop since 2008. It’s not the only correction we’ve had since then, but everyone is reacting. In fact, over the past week, $30 billion has been pulled out. 

I’m Within 5 Years of Retirement or Already Retired. HELP!

We entered the year with a lot of hope and optimism, coming off a year of amazing growth in the market. Then, we had a quick, steep drop that has left everyone reeling. It’s a wake-up call to remind us we don’t know what to expect. 

So if you never know what to expect, then how should you respond to a correction like we just saw? The number one key to investing well, regardless of how the market is performing, is to know how you feel about risk. 

Risk tolerance is sometimes overblown. Often investors use it to cover our backsides when investments go poorly, but it’s also important to inform your investment strategy. 

You need to know what your plan is in case of a large market drop like we experienced in the last week and a half. 

Should I Stay Or Should I Go?

In the first week of February, $30 billion was pulled out of the market. Is it wise to sell your stocks while they’re losing value? A lot of people would say yes, but think about it like this. 

Would you sell your house as it was losing value, even if you didn’t have to move? 

Of course not! That doesn’t make any sense. You want to wait until it has value.

But that’s the first reaction people have with their investments when we have a correction. If you’re close to retirement or already in retirement, though, losing this money is something you may not be able to recover from. 

Hindsight Is 20/20!

It’s easy for me to sit here now and give you advice about what you should have done before you experienced this drop. You see this on financial shows all the time. 

People always have the best advice to tell you what you should have done, but where were they two weeks ago? 

Well, here’s the advice I did actually give someone before the market drop. Two weeks before the correction, I received a letter from David. He’s 76 years old with a Vanguard Portfolio of $905,000 and is already in retirement. He wanted to know what he should do to protect his money if the market corrects. 

My answer was: We’re coming into this year on the second-longest bull market in history, so we know the correction will come. It’s not a matter of if but a matter of when. The problem is no one knows when it will happen. It could be tomorrow or two years from tomorrow. **Since you’re already in your retirement though, and your investments are part of your income, you need to invest as if the correction will come tomorrow. **

With a plan and mindset that is prepared for the worst, regardless of what happens, you know you’re going to be okay.

“I’m Losing Money… What Do I Do?!”

If the last week was a surprise for you and you’re panicking, don’t beat yourself up. There’s nothing you can do about that now. What’s important is what you’re going to do in the future. Make sure you invest knowing your level of risk. 

As the market was in the middle of its drop, I received an email from Alan, who only wrote me one line: “I’m losing money… What do I do?!”

Is that how you felt too? The worst thing you can do right now is panic and sell your stocks as they’re dropping. 

Remember, you haven’t actually lost money until you sell. 

The value has dropped, but only if you sell, have you locked in that loss.

There’s no faster way to kill your portfolio than to sell it as it’s losing value. 

Don’t Get Stuck On The Treadmill

The problem most people have with investing is that they’re haunted by the “What-If”s. They get stuck on a never-ending treadmill, jumping on and jumping off, depending on how they’re feeling about how the market. 

They keep running, going nowhere, trying to figure out the timing of the market. It’s impossible to time the market, so don’t plan your investment strategy around it. 

You can’t make market decision based on your gut. That’s not a way to live your life..png

A record amount of new money went into the market in January, since the market had been up for so long. People saw the market going up and up, so they jumped on and bought in. Now everything is dropping and many of these people who just bought in have probably now pulled out. They bought in high and sold out low. That’s the absolute worst strategy. 

You can’t make market decisions based on your gut. That’s not a way to live your life. 

Instead, figure out how much risk you can take and create a plan.

How Much Risk Can Your Retirement Handle? 

When you’re younger, it’s important to figure out how much risk you can handle, but this is different than thinking about how much your retirement can handle. 

How do you do that? With our clients, we look at their total financial picture, social security, 401Ks, investments, everything. We figure out how much risk they’re currently taking and create scenarios for the future so they know what they are potentially going to lose. We also look at how much they spend every month and figure out what they’d like to leave behind for their family. Then, we adjust their portfolio and adjust it immediately. 

It’s important to get your portfolio where it needs to be as soon as possible. Get your investments to your preferred place of risk and then stay there, regardless of what the market does. 

Stay in your sweet spot.

Get your investments to your preferred place of risk and then stay there, regardless of what the market does..png

Get Peace of Mind And Move Forward

I can’t begin to describe to you the peace you’ll have when you have your portfolio in this great place so you don’t feel the pressure from each dip and change in the market. 

**You’ll know that you’re where you need to be and you can keep moving forward. **


If you know you’re not in your sweet spot, in this place of peace of mind, now is the time to set up a free consultation with us. You’ll be able to get a full look at your financial situation and figure out your current level of risk. We’ll see if you’re investing too aggressively or too conservatively and plan out your next steps. Don’t let the market ruin your dreams for retirement. 

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