Council Post: Stay The Course: Three Tips To Navigate Retirement Planning In A Volatile Market

Craig Reid is the President and National Practice Leader of Retirement and Wealth at Marsh McLennan Agency (MMA), a subsidiary of Marsh.

No one enjoys seeing their investments lose value. People are generally loss averse—they would rather lose less than gain more. In fact, research shows the psychological pain of losing is twice as powerful as the pleasure of gaining. In a volatile market like we’ve experienced this past year, it’s hard to keep your cool or simply want to sit on the sidelines until things smooth out. However, investing with emotion typically creates the opposite results you’re looking for. So, before you make a move you’ll later regret, consider these three easy steps to stay the course and navigate your retirement planning in a volatile market.

Step One: Understand That Markets Are Cyclical

There have been 11 major market drawdowns in the U.S. stock market during the past 100 years, including the dot-com bubble in 2000, the financial crisis in 2008, and the Covid-19 pandemic in 2020. Even so, the market is resilient and posts significant cumulative returns for the one-, five- and 10-year periods following such an event. Markets fluctuate dramatically over any short period of time, but over the long term, they have proven to increase in value. Except for people nearing or in retirement, your retirement accounts are intended for future use; therefore, you can stay invested to capture the gains when the market bounces back.

Step Two: Embrace Financial Education

Let’s face it—it’s hard to make good decisions without having the right information on which to base those decisions. Although many states now require a course on personal finances as a prerequisite for high school graduation, most people in the American workforce today are deficient in the basics of personal financial management. Fortunately, an increasing number of employer-sponsored retirement plans offer financial education resources. These range from on-demand courses to group and one-on-one education meetings to full-service financial advice. The goal of these services is to help employees make better decisions with their money, including long-term investment-related decisions, and reach a more dignified retirement.

Leverage these resources to help you stay the course—watch on-demand videos to learn more about financial topics that interest you, sit in on group financial education sessions, and schedule a call with your plan’s financial advisor. If these services aren’t available to you through your employer, ask your company’s HR department to add these to your benefits plan.

Step Three: Seek Help From A Financial Professional

Would you go to your primary care physician if you needed heart surgery? Of course not! Similarly, unless you’re a financial professional, you should probably seek help from a financial professional to create a plan, set financial goals, and have a lifeline to turn to when turbulence hits. If you are a financial professional, there’s an argument to be made that you should also seek help from another financial professional. I don’t know many heart surgeons who perform surgery on themselves.

Financial advisors, professionals who work with individuals on their finances, offer a range of services and can be paid for these services in a variety of ways. Fee-based financial advisors offer unbiased advice in the best interest of their clients, whereas brokers receive a commission for the products they sell. Additionally, people looking for an in-depth financial plan will seek help from a Certified Financial Planner, someone who obtained the gold standard certifications for practitioners in the personal financial advisory industry.

Whichever professional you choose to work with, the key to a great client-advisor relationship is finding someone you trust and enjoy speaking with, and who you feel delivers the value for which you pay.

Voice of the American Worker, an annual report published by Franklin Templeton, confirmed that the current economic climate is accelerating financial stress and shifting back milestones like retirement. Employees are looking to their employers for more personalized support in improving well-being across all areas of their financial health. Accessing financial resources through employer-sponsored plans is not new. Still, it’s certainly a trend squarely on its front foot targeted at reducing financial stress and helping American workers achieve their desired outcomes.

When things get rocky like they are these days, there is invariable uncertainty around what to do. Remember, markets are cyclical and resilient; educate yourself beginning with financial basics, and seek help from a financial professional. These three steps will help you ride the waves of uncertainty and stay the course during volatile markets.

The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

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