If you're worried about your plan to retire, there are several steps financial planners advise. Ameriprise financial adviser Lisa Tuttle explains:
- Talk to a trusted financial planner. He or she may suggest using the down market as a buying opportunity or may rebalance accounts based on your risk and long-term goals.
- Manage controllable expenses to build up accounts. Budget your food and other expenses. If you can delay a home remodel right now, that might be beneficial.
- Keep contributing to your 401(k) or other retirement accounts. Stopping is one of the worst things you can do. The same goes for selling off investments when the market is down. That locks in losses. "We are currently in the 10th bear market since 1962, and the average return even just a year after the bottom of each market is 50%," Tuttle said. "Think about that."
- Because the market is lower, consider converting some money from IRAs to Roth IRAs and paying those taxes now. You will pay less on conversion taxes now than when the stock market is higher.
- If your balance sheet doesn't match what you will need for a long retirement, consider delaying retirement. The idea is to live on 4% of your retirement savings each year.
- Work out with an adviser a three-bucket retirement budget plan. Bucket 1 is your cash or cash alternative accounts. Bucket 2 is for conservative investments. Bucket 3 is for long-term investments. The goal is to live from the cash bucket and refill each bucket from the next. That way, you can avoid panicking during a crisis. "We look at it as like a cascading waterfall. You are always taking your income needs out of bucket number one, which is a safe place," Tuttle said.
