The Clock is Ticking - Protect your Savings

In today’s turbulent economic landscape, ensuring a secure retirement can feel more challenging than ever. With stock market fluctuations, inflation rates climbing, and an uncertain future ahead, many savers and retirees are wondering if their savings will last through retirement. The importance of safeguarding your savings in the face of market volatility cannot be overstated. Retirees and soon-to-be retirees alike should feel empowered to protect the nest egg they’ve worked so hard to build. But without the right actions, hard-earned savings can be wiped out in an instant. The clock is ticking, and now is the time to take control of your financial future.

Why Timing Matters in Retirement Planning

Time is an essential factor in all aspects of retirement planning. But it’s not just about the amount of time you’ve saved—when you withdraw those savings matters too. This concept is known as the "Sequence of Returns" Risk. Sequence of returns risk emphasizes the idea that the order of returns (whether a market downturn happens early or later in retirement) can significantly impact how long savings last. Even with similar long-term returns, retirees who experience significant market losses early on can find their savings depleted faster than those who encounter those losses later.

To visualize this, imagine two retirees with identical savings and investment portfolios:

Erica experiences a severe market downturn within the first few years of retirement, while Mark does not. Erica is now in a situation that with early losses, she may run out of funds far sooner. Since Mark doesn't experience losses in the beginning, he is able to simply pull from the interest. 

Once Erica's savings are withdrawn in a down market, it becomes increasingly challenging to replenish those funds, even if the market eventually rebounds. Acting now to protect against this risk can mean the difference between a retirement full of financial peace and one filled with constant worry.

Strategies to Protect Savings

Protecting your savings in retirement is not only about growth but also about preservation. Below are some actionable strategies that can help you shield your savings from excessive exposure to market volatility while positioning yourself for long-term security.

1. Diversify Your Portfolio

Diversification is a powerful tool for reducing risk. By spreading your assets across different asset classes, you can mitigate the impact of a downturn in any single area of your portfolio.

 A CERTIFIED FINANCIAL PLANNER (CFP®) can help assess your risk tolerance and recommend an asset allocation tailored to your needs. For example, a mix of equities, bonds, and alternative investments can provide stability even during turbulent times.

2. Consider Guaranteed Income Options

For retirees worried about outliving their savings, guaranteed income options like annuities offer peace of mind. An annuity, if used wisely, can provide a steady stream of income for life, regardless of how the market performs. 

An experienced CFP® can guide you in understanding the pros and cons of annuities and help determine if they’re a good fit for your retirement plan.

3. Implement a Withdrawal Strategy

Having a smart withdrawal strategy can protect against sequence of returns risk. The "4% rule" is a traditional approach that suggests withdrawing 4% of your retirement portfolio each year, adjusting for inflation, to help savings last 30 years. However, in today’s fluctuating market, some retirees may benefit from a more flexible withdrawal strategy.

 A CERTIFIED FINANCIAL PLANNER (CFP®) can help you create a sustainable withdrawal plan that adapts to market conditions, helping your savings last longer.

4. Reduce Debt Before Retiring

Carrying debt into retirement can put an unnecessary strain on your savings. By paying off high-interest debt, such as credit card balances, before retirement, you’ll reduce the pressure on your retirement income. With fewer financial obligations, you’ll be better prepared to weather market downturns without dipping too deeply into your savings.

5. Create a Cash Reserve

Setting aside a cash reserve can serve as a buffer during periods of market volatility. With a cash cushion, you won’t need to withdraw from your investment portfolio during a market downturn. 

A good rule of thumb is to keep at least six months to a year’s worth of living expenses in a low-risk, liquid account. This can give your investments time to recover, helping ensure that your long-term savings aren’t compromised by short-term losses.

Don’t Wait Until It’s Too Late

Market downturns are inevitable, but their impact on your retirement can be managed with careful planning. Failing to take action until a crisis occurs can result in significant financial setbacks, which may take years to recover from—if they can be recovered at all. The hard truth is that many retirees do not have the time to ride out a prolonged market downturn, especially in the critical early years of retirement.

A lack of preparation for market downturns can lead to “panic selling,” where individuals sell assets at a loss out of fear rather than sticking to a carefully crafted strategy. Those who don’t have a clear, well-considered plan often find themselves reacting emotionally, which can result in even greater losses. Working with a CERTIFIED FINANCIAL PLANNER can prevent these pitfalls, ensuring that you have a strategy in place to ride out the storms while keeping your financial goals on track.

Act Now for Peace of Mind

The clock is ticking, and the time to act is now. Protecting your savings today can prevent financial hardship tomorrow, especially in an uncertain market environment. By working with a CERTIFIED FINANCIAL PLANNER and implementing strategies to protect your savings, you’ll be better positioned to handle market volatility, avoid panic-driven decisions, and preserve your wealth for the long term.

For retirees and future retirees alike, planning today brings the peace of mind that you’re prepared for tomorrow. Take action by scheduling a meeting with one of our CFP® professionals, who can guide you in creating a comprehensive retirement strategy tailored to your goals. And if you’re unsure of where you currently stand, start by taking our Financial Checkpoint Quiz—an easy, effective way to assess your readiness and identify areas for improvement.

Secure your future, protect your peace of mind, and act now—before it’s too late.

This article is provided by McAdam LLC dba RetireUS (“McAdam” or the “Firm”) for informational purposes only. Investing involves the risk of loss and investors should be prepared to bear potential losses. Past performance may not be indicative of future results and may have been impacted by events and economic conditions that will not prevail in the future. No portion of this article is to be construed as a solicitation to buy or sell a security or the provision of personalized investment, tax, or legal advice. Certain information contained in this report is derived from sources that McAdam believes to be reliable; however, the Firm does not guarantee the accuracy or timeliness of such information and assumes no liability for any resulting damages.

This article is the sole opinion of this individual and is not indicative of the firm’s belief. Any references made regarding the taxable nature of your investments should not be construed as tax advice. McAdam LLC is not a tax advisory firm; therefore, any tax decisions or assumptions should be made/verified with your tax professional.