Retirement savings tips for a bear market

Throughout history the stock market has followed a pattern of bear and bull markets. This means some years are great for investors, some are mediocre, and others can be a little scary. Currently, we’re experiencing the downside, which is causing some investors to question how they should manage their investments.

The good news is that you can successfully navigate this market, but it’s not a one-size-fits-all approach which is it is important to work with a financial planner on your unique situation. You and your trusted financial planner can define your retirement timelines, current investments, and overall financial goals can help you determine the best options now and in the future.

Whether you’re a new investor, halfway to retirement, or already enjoying your golden years, consider these options to help actively manage your plan and assuage any worry you may have.

Early investors

If you are just getting started in investing, the good news is you still have time. So you shouldn’t be worried about the impacts the current market downturn has had on your portfolio. Actually, it’s just the opposite. Now is the time to be opportunistic as prices are low. Being able to invest while the market is down, especially in tax deferred accounts, can help to create significant wealth down the road. Here are a couple things to consider:

• If your employer offers a match within your employer sponsored retirement plan, be sure to take full advantage. This is free money.
• Contribute to a ROTH IRA. Money invested in a ROTH IRA grows tax free, meaning you will never have to pay taxes when you withdraw money in later years
• Review your overall investment strategy and asset allocation to make sure it aligns with your financial goals and risk tolerance

That said, it can be challenging to select the right combination of stocks to purchase. Talk with your financial advisors to determine an appropriate mix so you build a portfolio that is in-line with both your risk tolerance and your short- and long-term financial goals and is also complementary to your other retirement account planning.

Nearing retirement

If you are within 10 years of retirement, there’s no need to panic. The average bear cycle lasts usually just over a year. The years before retirement are shrinking, but it is important to remember that you are going to need your money to last throughout your retirement, which could be 20-30 years or even longer. Here are few things to consider regarding your overall investment and retirement strategy:

• Rebalance your portfolio. Asset classes perform differently in up and down cycles. As such, your asset allocation may have drifted from its original allocation – making your portfolio more or less risky than you are comfortable with. If you have not actively reviewed your holdings within the past six months, take time to review and assess your performance and risk.
• Check your tax efficiency. If you have taxable accounts, you may want to consider tax-loss harvesting. This is when you sell some investments at a loss to offset gains you may have realized from other investments. This can help to reduce your tax bill.
• Consider a ROTH conversion. A ROTH Conversion is when you convert all or part of a Traditional IRA to a ROTH IRA to take advantage of the tax-free benefits offered through the ROTH IRA. The downside to a ROTH conversion is you will have to pay taxes on the amount you convert. This is why converting now, while your account balance is lower, could be more beneficial than waiting for your account balance to go back up.

A financial planner can help you evaluate whether or not it makes sense to consider a ROTH Conversion at this time. The critical item to remember is that your money not only has to get you to retirement but through retirement. There is still time to save and invest before you exit the workforce. While it may be unsettling to see dips in your investment accounts, it’s important to review and strategically act versus review and react.

In retirement

If you are already retired, you most likely have built a distribution strategy and are executing on it. You may have already positioned your assets to be lower risk and more stable during up and down cycles. However, it’s still normal to have some uncertainty. Now is a good time to review your entire distribution plan and determine if any adjustments are needed. Here are a couple things to consider:

• Stress test your current plan – If you are concerned about an elongated period of high inflation or period of slow growth in the market, your financial planner has the ability to demonstrate what impact these scenarios would have on your retirement lifestyle. This may help you sleep better knowing that what those impacts might look like.
• Check your tax efficiency – taxes don’t end just because your retired. As stated above, reviewing the tax efficiency of your plan is always a good idea. Whether it be tax harvesting or ROTH conversion it is always a good idea to see if plan can become more tax efficient.

The bottom line is you can effectively manage your investments at any point in your investing lifecycle during a bear market. The important thing is to have a strong financial partner and plan in place, and to check in on the plan and your specific situation as the market goes through its natural cycles.

Interested in learning more about Private Wealth Management? With UMB, you have a guiding partner from financial advising and investment portfolio management, to wealth-building strategies and retirement and legacy preservation plans.

Check out our retirement savings calculator to forecast how you can improve your retirement outlook.

Financial planning services are offered by UMB Private Wealth Management and UMB Financial Services, Inc. UMB Private Wealth Management is a division within UMB Bank, n.a. that manages active portfolios for individuals, fiduciary accounts, employee benefit plans, endowments and foundations. UMB Bank, n.a., is a subsidiary of UMB Financial Corporation. UMB Financial Services, Inc.is a wholly-owned subsidiary of UMB Financial Corporation and an affiliate of UMB Bank, n.a.

This material is provided for informational purposes only and contains no investment advice or recommendations to buy or sell any specific securities or engage in any specific investment strategy. Statements in the presentation are based on the opinions of the author and are subject to change at any time without notice. You should not use this presentation as a substitute for your own judgment, and you should consult the appropriate financial professional before making any tax, legal, financial planning or investment decisions.