Enjoying your retirement is all about having the time – and the resources – to live your best life. The time part is easy; leaving employment means you can fill your days with whatever you like instead of having to show up to work like you usually do. Saving money after retirement to support your chosen quality of life? That’s the challenge. Usually, preparing for retirement comes down to building your savings, and this often means investing in the stock market.
Yet the financial markets can sometimes lead to unpleasant situations. In times of economic turmoil, for example, stocks can take a major hit. This can often seriously impact the value of a retiree’s investment portfolio. It can be painful to see the investments you’ve been building for so long lose so much value seemingly overnight, especially if you’ve been relying on them to supplement your retirement income. What should retirees do in the stock market? Or should retirees get out of the stock market entirely? Let’s discuss.
Should Retirees Get Out of the Stock Market?
Retirees should not necessarily completely get out of the stock market. There’s an old saying in the financial world: fear, uncertainty, and doubt are your biggest enemies. Allowing panic to set in clouds your ability to think rationally about the status of your investment portfolio, and when you’re not thinking clearly, you’re more likely to act out of fear. This is universally a bad idea, as you could end up making a mistake that might cost you even more in the long run!
It might not sound like an easy task but take a step back and breathe for a moment if you’ve recently gotten bad news about your investment portfolio. Market volatility can be scary, but keep in mind that, historically, stock markets have recovered from dips and gone on to see better returns in the long run. Instead of getting out of the stock market, most retirees use a “buy and hold” strategy to maximize long-term gains exactly for this reason.
Obviously a financial planner can offer the best advice, but if you are panicking right now, consider waiting for the inevitable rebound instead of pulling everything out now, at a low point.
What Should Retirees Do in the Stock Market?
1. Rely on Diversification to Insulate Your Investment
There is no investment without risk – that simply comes with the territory. However, it’s always a good idea to diversify your investment portfolio to insulate yourself from that risk to a certain degree. The more diverse your portfolio holdings, the better chances you have for the performance of one asset you’ve invested in to offset the losses in others. This helps protect your overall investment.
There are dozens of different diversification strategies, but the core concept is to find assets that are non-correlated. This means investing in an asset that tends to perform well whenever a contrasting asset does poorly. Many savvy investors diversify by investing in stocks and U.S. treasury bonds in a 60/40 split, as bonds tend to perform better in uncertain economic environments, while stocks underperform in those same situations.
2. Manage Your Retirement Resources Carefully
While retirees should in most cases be in the stock market, it can be so volatile in times of economic uncertainty. It’s always wise to secure other ways to maximize your retirement resources so you don’t find yourself in an unpleasant situation. Riding out any dips in the market and diversifying your holdings are part of this, but a wider strategy involves both ensuring you have savings in liquid assets and that you minimize your living expenses whenever possible.
Low-risk investments like savings accounts might not help you grow your retirement income significantly, but they do provide you quick access to resources in the event you need them. This makes maintaining a small but significant cash reserve a smart step. Likewise, managing your expenses carefully to ensure you don’t overextend yourself will make it easier for you to afford what you need in the event that your stock portfolio goes through some trouble.
CCRC Living: The Answer to an Affordable Retirement
Since managing your retirement resources is such an important aspect of weathering economic storms, it makes sense to evaluate the biggest expense in your life: your living arrangements. In this case, many retirees have found it incredibly helpful to move to a continuing care retirement community (CCRC). These types of retirement communities are ideal for a number of reasons, but they’re specifically helpful because it helps keep your living expenses manageable.
Retirement community living is easy and affordable because the hard work that goes along with managing your own property is taken care of for you. Just one monthly fee and you don’t have to worry about maintenance and repairs, landscaping, trash removal, snow removal, utilities, and the like. The same goes for property taxes — they simply vanish. Additionally, many retirement communities provide resort-like campuses and amenities including fitness centers, swimming pools, fine dining options, and even locations to practice hobbies such as art studios, woodworking shops, and gardens — all typically included in the standard monthly fee.
CCRCs also Help Control Your Healthcare Costs
Retirees know that Medicare is great, but it doesn’t cover everything. There may come a time when you need a higher level of health support, such as assisted living. Those monthly fees can be exponentially more than your current monthly budget. Thankfully, CCRCs also come through for you in this situation as well.
A CCRC provides a continuum of care for its residents in that they offer healthcare coverage that meets the needs of a resident, regardless of how those needs change over time. Whether you can live independently, require assisted living services, or even skilled nursing, a CCRC is equipped to support. The best part, though, is that your medical costs are contracted to stay the same throughout your stay from when you move in. This is a major cost-saving measure, as you never have to worry about being impacted by rising healthcare costs from year to year.
What exactly does this mean? Simple: If you move in as a healthy independent living, but then at some point need a higher level of care such as assisted living services, you will receive it on the same campus, for no direct increase to your monthly fee.
Keep Calm and Carry On
Times of economic uncertainty can be harrowing for investors, especially retirees wondering if they should even be in the stock market. In situations such as these, be sure to keep a clear head and remember our tips for what retirees should do in the stock market, including:
- Diversify your holdings in low-risk investments
- Manage your expenses more carefully
- Consider a move to a CCRC
You can learn more about some of the best CCRCs in the country by exploring those offered by Acts Retirement-Life Communities.
