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What to Do About Choppy #StockMarkets! #retired #retirement #over50 #50plus

What to Do About Choppy Stock Markets thefiftyplusnetwork aging babyboomer babyboomers midlife midlifer over50 50plus retired retiree retirementplan

If you are retired, or within a few years of retiring, the recent volatility in the stock market must be unnerving … Retirees depend on their savings and investments to fund their lifestyle. Any risk to their nest egg raises red flags! For years and years you work to save for retirement, and one stock market crash can cut in it half! What to do?

  1. Don’t panic and sell into the crash. Remember — a loss is not a loss until you sell.
  2. Think long-term. It may take years to recover from a stock market crash, but as Mitt Romney said, “the market always comes back.”
  3. Calculate your annual living expenses and make sure you always have 2 – 3 years of living expenses saved in an FDIC-insured account.

We are old enough to remember the stock market crash of 1987. We were just starting out in our careers. On Monday, October 19, 1987, my husband called me around 4pm in the afternoon. He whispered to me, “the stock market lost over 500 points on the Dow.” The Dow Jones Industrial Average was only 2,246 points prior to the crash, so a loss of 500 points was a significant loss! At that time, we had a retirement account invested in Legg Mason Value Trust, a mutual fund. The mutual fund lost a third of it’s net asset value on that day. We panicked and sold the mutual fund the next day. We learned a valuable lesson: Stick it out because eventually the market will recover. To learn more about mutual fund investing, click Bogle On Mutual Funds: New Perspectives For The Intelligent Investor (Wiley Investment Classics).

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#Retirement Planner Recommends 2-3 Yrs of Living Expenses for #Retirees!

Retirement Planning Seminar how to retire when to retire how to save for retirement retirement plan retirement planning retirement planner retirement finances

We got up at 5:30 am on Saturday morning to attend a retirement planning seminar. The most important advice imparted by the speaker was the following: Retirees should have 2 – 3 years worth of living expenses stashed away for emergencies! Why? The reason is that it takes 3 years (on average) to recover from a bear market. What is a bear market? Think back to the Autumn of 2008, when the stock market dropped 50% over a 6 month period of time from September 29, 2008 to March 5, 2009. That was the beginning of the bear market. The speaker said that it usually takes about 3 years for the economy to recover from a bear market. Therefore, it is crucial to retirees’ survival to have 2 – 3 years of living expenses to pay bills, and stay afloat. If a retiree has to spend down their retirement accounts to pay bills, they may have to sell stocks or mutual funds at depressed prices. In farmer parlance, that is called “eating your seed corn.”

Where To Stash Emergency Fund?

When saving for the emergency fund, the speaker advised safe bank accounts insured by the FDIC. Brick and mortar banks pay less interest than online banks, but pre-retirees and retirees are most likely more comfortable with brick and mortar banks. It is reassuring to know we can reach our brick and mortar bank in a few minutes, and access our funds. To learn more about bull and bear stock markets, click Stock Market 101: From Bull and Bear Markets to Dividends, Shares, and Margins―Your Essential Guide to the Stock Market (Adams 101).

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