As the Federal Reserve prepares to cut interest rates, the future of the U.S. economy is uncertain. Will we see a recession, or will the central bank manage a “soft landing”? This uncertainty is particularly concerning for those approaching retirement, as a downturn could significantly impact their nest egg and planned retirement date.
Anne Lester, author of “Your Best Financial Life” and former head of retirement solutions at JPMorgan, emphasizes the importance of having a Plan B in place. Building scenarios and preparing for different outcomes can help retirees avoid making hasty decisions during market volatility.
Research shows that people nearing retirement are more likely to panic during a downturn. Being proactive now is crucial, especially for older Americans for whom retirement is becoming a reality. Asking important questions and evaluating your current retirement plan is essential.
One key question to consider is whether your portfolio is allocated properly. A market decline can pose a sequence of returns risk, impacting how long your retirement savings will last. It’s crucial to be prepared for unexpected market hits and have a strategy in place to mitigate risks.
While rules of thumb exist to guide asset allocation, it’s essential to consider your individual financial situation and risk tolerance. Taking action now to address potential risks, such as establishing a cash buffer or exploring government bonds, can help protect your retirement savings.
Another critical aspect to consider is your sources of income. Having guaranteed income, such as Social Security or annuities, can help reduce the impact of market fluctuations on your portfolio. Delaying Social Security benefits and exploring annuity options can provide a steady stream of income during retirement.
In uncertain economic times, having a solid financial plan and being proactive can help retirees navigate market volatility and protect their retirement savings. Consulting with a reputable licensed financial professional can provide valuable insights tailored to your individual circumstances.