Understanding the Risks of Market Fluctuations and How to Protect Your Wealth in Retirement

For retirees or those nearing retirement, safeguarding your wealth throughout retirement should be one of your main priorities. This can be accomplished by understanding the risks that come with the current markets.

Market fluctuations can have a significant impact on your portfolio, and it's important to understand the risks and how to protect your assets. In this blog, we will discuss the risks of market fluctuations and provide some tips on how to protect your wealth in retirement.

Market Fluctuations and Risk

Market fluctuations are a natural part of the economy. The stock market can rise and fall based on a variety of factors, including political events, economic indicators, and changes in the global market. While market fluctuations can present opportunities for investors, they can also pose risks for retirees.

One of the biggest risks of market fluctuations is that they can have a significant impact on your retirement savings. If the stock market experiences a downturn and your investments lose value, your retirement savings could be significantly impacted. This could mean that you need to adjust your retirement plans, delay retirement, or make other changes to your financial strategy.

Another risk of market fluctuations is that they can create a sense of uncertainty and anxiety amongst retirees and pre-retirees alike. 

At NJM Wealth Preservation Strategies, we understand it can be difficult to watch your investments lose value, and that this can create severe stress and concern for the future. However, it's important to remember that market fluctuations are a normal part of investing, and there are strategies you can use to protect your wealth in retirement.

Protecting Your Wealth in Retirement 101

While you can't control the risks of market fluctuations, there are steps you can take to help protect your wealth. Here are some tips to consider.

  1. Diversify Your Portfolio

One of the best ways to protect your wealth in retirement is to diversify your portfolio. By spreading your investments across different asset classes, such as stocks, bonds, and cash, you can reduce your exposure to any one type of investment. This can help minimize the impact of market fluctuations on your portfolio.

Your asset allocation should adapt & change with these aspects over time. Balance is key when it comes to investing. Being on the extreme end of either spectrum can cause imbalance that, if correctable, will likely come at a cost.

  1. Consider Annuities

Annuities have their pros and cons. 

An annuity is a financial product designed to provide a steady stream of income during your retirement years. Annuities are typically purchased from an insurance company and can come in several different forms including:

  • Fixed annuities
  • Variable annuities
  • Indexed annuities

One of the main advantages of annuities is that they can provide a guaranteed income stream that is not affected by market fluctuations. This can be particularly appealing for retirees who are looking for a predictable income source in retirement. With an annuity, you can receive regular payments for a specified period of time or for the rest of your life, depending on the type of annuity you choose.

It's important to note that not all annuities are created equally. Variable annuities can be a poor investment for many people, while a short term fixed annuity could be a powerful tool in your investment arsenal. 

Annuities as a whole have evolved over time & no longer possess the unappealing drawbacks such as the dreaded long-term contracts, loss of control over your investment, low-to-no interest earned, and high fees. There are hybrid options available now that offer higher liquidity while remaining short term. Our top performers offered industry leading returns out of all asset classes for 2022.

As with any new investment, it is essential to weigh all of these factors and ALWAYS consult with your Professional Fiduciary Advisor before making the decision to invest in annuities so that you can choose the one best suited for your future & portfolio.

  1. Maintain a Cash Reserve

Maintaining a cash reserve can help protect your wealth in retirement whatever the economic climate. Having a cash reserve can help you cover unexpected expenses or ride out market downturns without having to sell investments at a loss. As a general rule of thumb, retirees should have enough cash to cover six to twelve months of living expenses-maybe more during such volatile times.

Also known as an “emergency fund”, amid inflation, finding extra money for a cash reserve is probably harder — and more daunting. The inflation data from the government’s consumer price index report doesn’t help. It showed that despite efforts by the Federal Reserve to slow the economy and bring down prices through interest rate hikes, inflation is not going away — in fact, prices for a broad range of goods and services just went up again, and inflation rose even higher than market expectations. (Latest update index increased 0.9 percent prior to seasonal adjustment.) 

Further Ways to Protect Your Nest Egg in 2023

Higher inflation and worries about a potential recession can leave you feeling concerned about your finances. While you can’t control the economy, there are further steps you can take to help you and your family stay as secure as possible:

  1. Keep saving: Saving for a rainy day is crucial. Keep putting as much money away as you can to help your savings grow despite inflation.
  2. Review your budget: Now might be a good time to adjust your spending habits to counter the effects of inflation on your overall household spending.
  3. Check your investment mix: Talk to a trusted financial advisor about money you’ve invested in stocks, bonds or mutual funds. A financial professional can talk you through how changes in the economy affect the market and build a strategy with you to protect your investments.
  4. Check your health: Make sure you feel comfortable with your life insurance or disability insurance coverage, so that in a true worst-case situation your family has the financial protection they need. This should also include a beneficiary ‘check-up’ which we happily conduct for all new clients.

Working With NJM

When it comes to planning for retirement, working with a Fiduciary advisor can provide you with invaluable assistance. By definition, a Fiduciary makes investment decisions with your best interest in mind. At NJM Wealth Preservation Strategies, you are the boss & your plan is centered around your best interests, goals & needs. We encourage you to ask questions & pride ourselves on our accessibility as well as transparency. 

By working with a Fiduciary advisor like Nic J. McLeod and his team, you can create a retirement plan that takes into account your unique financial situation and goals. We can help you develop a strategy that balances risk and return, taking into consideration factors such as your retirement lifestyle goals, expected expenses, and investment preferences. If you're interested in working with a true Fiduciary advisor, NJM Wealth and Preservation Strategies can be of service to you. 

Let’s Get Started

Market fluctuations can pose a significant risk to retirees, but there are steps you can take to protect your wealth. Diversifying your portfolio, learning about the different kinds of annuities, maintaining a cash reserve, and working with a Wealth Preservation Specialist are all strategies that can help you minimize the impact of market fluctuations on your retirement savings. 

At NJM Wealth and Preservation Strategies, we take the time to understand your situation and craft a plan that works for you.

President and owner Nicolas (Nic) J. McLeod is a man of determination and competitive grit. He is a second-generation Wealth Preservation Specialist and was fortunate to grow up having witnessed his father act as a trailblazer in an industry we refer to today as Wealth Preservation. And now Nic and his team are ready to help you.

Don't hesitate to contact us today to schedule your complimentary consultation and learn more about how we can assist you in safeguarding your retirement savings.