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Being Retired Through Uncertainty

Being Retired Through Uncertainty

May 04, 2024

Following up from one of our last blogs, Retirement Investing Through Uncertainty, and if you haven’t read that, you can find that here. 

This will be a follow up for those in retirement while going through uncertainty, and ways to think about what retirement in uncertain times may mean for you. But more importantly, how do you lower that stress as much as possible in these times. 

The first thing that is important to remember is that the market and economy will not always be perfect when you are retired. There will be uncertain times and the market will have periods where it is down for an extended period. 

Even if we look back in recent history. If you are someone who retired or was already retired in 2019, then your potential pain points in retirement with regards to the market and economy at that time are very different than they are now only five years later. And five years from now they may be very different again. Point being, there will always be something everyone is talking about, it is just adjusting to what that is at the time that is the important part.

Knowing that this will consistently be the case when we retire.You need to have a plan that you are comfortable with. Having a plan when everything is great is easy. It is having a plan when everything isn’t that is that much more important.

First part of that plan is tackling the mindset piece.

Psychologically, it is key to stay level headed. To know that neither good or the bad times last forever but they are here for a bit and they typically come back around. And to know that with the right investment mix, even the bad times don’t need to make you lose sleep. 

Ultimately, it will always help you to take a step back and just think about your day to day in retirement. To understand that just like the economy and stock market, you are also resilient in retirement. And a big part of that resilience to accompany the psychological piece is having the right investment mix and plan. 

And when you’re retired? 

That may look something like having a portion of your assets in stocks, to keep up with inflation and participate in market growth. It is important to remember that things will get more expensive over time, that is just the nature of inflation. While it would be great to not have that be the case, we need the appropriate pieces in place to face that reality. And that is the stock side of the portfolio. You may not be looking for the home run return years anymore, but the singles and doubles return wise may be more than enough to ensure success. 

To accompany those stocks may mean having a portion of your assets in bonds. Using this portion in bonds provides that traditional “safer” side of your investment mix. Although past performance doesn't predict future results, we have seen that bonds historically perform better than equities when the market is in a down period. So while that portion of your investment in stocks is going down for the time being, this is when the bonds historically have kicked in and righted the ship. While they don’t traditionally earn the same return as stocks do in positive market years, they are essential to balance in volatile markets and getting some income from their yield also may make it an attractive investment. 

So, we have our stocks and our bonds.

There is one final piece we may want. 

That final piece is cash. 

It may sound weird to have a cash holding in your investment mix of bonds and stocks, but it is just as important. 

The reasons can be broken down into a couple different things but I will keep it straightforward. 

  • Having cash may keep you from selling stocks for purchases in a down market. 
  • In the more rare times that both stocks and bonds are down, cash may be your best friend as it stays steady here as well. 
  • The BIGGEST thing in my opinion, this cash is here to give you that peace of mind. It may help knowing that no matter what today or tomorrow’s headline may bring, you have that portion of cash on the sidelines so your retirement income and life isn’t impacted by the short-term movement of the markets. 

Cash, while not as flashy or interesting, gives another layer of security that you may need.

It is essential to have an appropriate balance between stocks, bonds, and cash to be able to be as prepared as possible for any market condition. 

It is important all the time, but especially in uncertain times, to have a good idea of what your risk tolerance is. This will ultimately decide what your mixture is with regards to stock, bonds, and cash. And while it would be great to have all stocks when the market is up and all cash when the market is down, that just isn’t possible for most people. So, having a combination of the three that you feel comfortable with and can remain consistent in both up and down markets is ultimately where you may want to be.

And if you’re not currently comfortable with your set up? Ask yourself why and see if there are some better options for you moving forward. There may be a solution you can implement to ease your mind. Or, being patient may be the best course of action as well. 

At the end of the day, you retire wanting to live your life while having the peace of mind that your investments will take care of you and that lifestyle you want to live. 

It is especially hard in the beginning of retirement. Because like anything else when you start, you’re new to retirement. It is a stage of life and a lifestyle that you may not have experienced before. And yes, it may be a little intimidating. But a rock solid investment plan that you are comfortable with no matter what the latest headlines in the news are is the most essential part to making sure you live the life you want to with as little stress as possible.