President Trump recently marked 100 days in office. After weeks of stock market turbulence, many older adults feel uncertain about their retirement. Nobody knows where the market or economy might stand in a few months or years.
However, some reassuring lessons remain for retirees worried about their financial futures. You don’t lose money unless you withdraw from your investments. Your retirement account may show losses when the stock market drops, but those losses are only temporary until the market recovers.
Once stock prices bounce back, your portfolio should recover its value without any actual losses. Selling your investments for less than you paid for them will result in realized losses. Therefore, one of the riskiest moves you can make is pulling your money out of the market after stock prices have dropped.
If you’re already retired, you may be unable to avoid pulling from your retirement account. However, minimizing your distributions is wise. The more money you leave in your account, the less you’ll lose by withdrawing during a market slump.
The stock market has survived challenging times in the past.
Lessons amid market uncertainty
In recent decades, we’ve experienced a global pandemic, severe social and political unrest, the collapse of the tech sector in the early 2000s, and the financial crisis in 2008.
Despite these challenges, the market has managed to recover and even thrive. Since January 2000, the S&P 500 has earned total returns of 287%. Though the coming months may be tough, history suggests that the market will pull through as it has.
During periods of uncertainty, one of the best strategies is to remember that even the most challenging times are only temporary. The average bear market for the S&P 500 since 1929 has lasted around 286 days, or about nine months. Even the longest bear markets in history lasted only around two years.
Recessions and bear markets are difficult to endure, but historically, the good times have far outlasted the bad. Maintaining a long-term outlook can make it easier to stay optimistic. Regardless of what lies ahead, focusing on the future can help you minimize risk and protect your retirement.
You’re not alone if you’re feeling nervous about how the next four years might affect your retirement. But remember, market volatility is nothing new. By avoiding withdrawals during downturns and keeping a long-term perspective, you can better navigate uncertainty and safeguard your financial future.
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