Seniors and the Stock Market

The bears have it – for now, anyway. Any time the stock market becomes unusually volatile or takes a definite downturn, investors wonder if they should take action or just wait it out. This question affects seniors, especially, because the older you get the less opportunity you have to take a long-term approach to investments.

You may need that money soon to help pay for your retirement. Meanwhile, high inflation and talk of a possible recession also affect financial planning as well as daily living.

Here are some tips to weather this bear market.

“Your reaction should depend on your current financial position as well as your goals,” says AARP. Most obviously, this relates to your age. So let’s look at a couple of different scenarios.

• You’re 50 Now and Plan to Retire at Age 65
  AARP recommends continuing to invest in your 401(k), 403(b), 457or IRA just as you have been. The average bear market lasts about 3.5 years, so you have plenty of time to get past that. In the interim, as stock prices fall, you can pick up some good investments at a low cost and sell at a profit later on.
• You’re Already Retired
  Resist the urge to tap into your retirement funds! Withdrawing money or borrowing against your account is rarely a good plan because you’ll be left with a smaller nest egg for retirement and/or increased expenses for repayment. That just makes things worse.

Planning to Weather Inevitable Stock Market Changes

Not surprisingly, financial advisors recommend taking a multi-pronged approach to securing the smoothest possible financial future.

1. Accumulate a cushion of cash

Ideally, seniors (and all adults, really) should have enough readily available cash to weather any sort of temporary financial setback, including a stock market downturn. How much? Well, advisors disagree on that, but their recommendations run from three to six months for those who are still working to two years or so if you’re retired.

In today’s economy, that might seem like poor advice. With inflation topping 9% recently, seniors are seeing a serious reduction in buying power. At the same time, interest rates for cash savings are paltry – still in the neighborhood of 1%. That makes it hard to get excited about building such an account.

Still, the point here isn’t asset growth, it’s to ensure you have something of a short-term financial security blanket so you can avoid tapping into the investments you’ve spent years accumulating. There are also other sources of cash that might work for you to cover necessities, such as a:

• Health savings account
• Home equity line of credit
Pledged asset line of credit

2. Diversify your investments

• Super-safe options such as bank CDs and money market funds
• Medium-risk options such as bond funds
• High-risk options, typically stocks

If you need cash, pull it from the lowest-yielding group (#1 above). That protects your other investments while the market recovers.

3. Monitor performance and rebalance your investments as needed

Even in bull markets, the bottom line is that stock performance changes over time. Are the stocks and bonds you chose and their relative share within your portfolio still serving you well? Maybe not, in which case you will want to make adjustments to protect and grow what you have.

Ultimately, the best financial plan depends on your specific situation – expenses, variety of income sources, and personal preferences. Because it’s so personal, decision-making can be an emotional experience. Working with a knowledgeable professional can relieve that emotional pressure and help you make the most productive decisions.

Not sure who to choose or how to protect yourself against investment fraud? Read this guide from the Securities and Exchange Commission.

Senior Living Simplifies Your Expenses

At Magnolia Manor, we simplify senior living by consolidating all of your living costs into one low monthly fee that covers housing, utilities, maintenance, landscaping, housekeeping, daily activities, and more. Our free online cost calculator will compare your current living expenses to those of Magnolia Manor, so you can see for yourself how affordable senior living can be. To learn more about senior living at one of our eight senior living communities, contact us online or give us a call at 855-540-LIFE (5433).