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Each week we post an original article on a variety of topics. Past topics include: reviewing your investment portfolio, handling the ups and downs of the stock market, and the questions to ask yourself before you retire.

We may even feature some of our clients, or have a fun quiz from time to time. Check back each week for a new post.

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How To Retire When The Market Is Dropping

Peter C. Hafner, CFP®, CWS® | October 25, 2018

The stock market had a big drop last week. In fact, it was the biggest decline since April.

Lots of people are frightened. But the question is, should you be?

A lot of that depends on where you are in your investment life. If you’re a younger person and retirement is far off in the future, it’s best to look at these declines as opportunities. But it’s a different story when you’re retirement age.

 

If You’re Nearly or Already Retired Market Declines Are Frightening

The reason it’s frightening if you’re close to retiring or already retired is that you don’t have time for the stock market to recover. You need to take distributions from your investment portfolio to cover your expenses whether the market is up or down. Delaying income until the stock market recovers will not be an option.

What’s crucially important at this point in your life is that you have a plan that allows you to take income from your investment portfolio, whether the stock market is going up or is going down.

If you don’t have that kind of a plan in place, a prolonged decline in the stock market could destroy your ability to take income from your investments. In fact, it could put you in a situation where you run out of money before you run out of life. And that is a situation that should be unacceptable for all of us.

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Good News: This Bull Market Has More Room To Run

Now by the way, I don’t think the stock market is headed for a long and protracted decline right now. I believe that the economy and corporate America are doing quite well.

In fact, the issue causing problems with the stock market at this time is that the Fed has been raising interest rates. But this is a good thing.

When an economy is strong, vibrant, and growing, like the one we have now, inflation can get out of control, overheat the economy and send us into a recession. That is why the Federal Reserve is raising interest rates.

Interest rates act like a brake on the economy and by raising rates, the fed can slow the rate of economic growth and keep inflation at reasonable levels.

 

 The fact that the Federal Reserve is raising interest rates is good news; it

 means the economy is healthy and the future is bright.

 

So, the question is, what do we do? How do we mitigate your risk and make sure we are able to get income we need from our investment portfolio for the rest of our lives; in good markets and bad?

 

The Stock Market’s Always Going to Be Like A Yo-Yo

We all know the stock market will have good times and bad times. That is what the stock market does.

It is the nature of the stock market to have periods of time when it goes up, sometimes periods when it goes up a lot. And then it’s also going to have periods of time when it goes down. Sometimes it will go down a lot in a very short amount of time.

 

So, we need to ask ourselves the following questions:

  • How exactly are we going to get money out of our investment portfolio and into our checking account whether the stock market is up or down?
  • What are we going to do when the next significant and protracted market decline comes? (Think about the financial crisis of 2008 and 2009)
  • How can we give ourselves a raise in income after we stop working? We will need to keep up with inflation after all.
  • What investments do we need in our portfolio to make this all possible?

 

Discover How to Take Control Of Your Retirement Portfolio

Over the next few weeks, I’ll show you some tools and strategies you can use to create an income stream that is both insulated from stock market declines and has the ability to rise over time and keep up with inflation.

When you follow the instructions I provide, you should be able to put all the pieces in place so you can have confidence that your money will last as long as you do.