5 Retiree Market Correction Counter Strategies
Baby Boomer retirees and near retirees are worried. They fear another dramatic downturn in the market just as they retire. They ask us what they can do to avoid what we call “sequence risk” or having the market head down dramatically just as they retire.
Here’s the alternatives we discuss:
- Go to cash – put up with capital gains taxes in some accounts
Selling all your mutual funds and stocks, especially if they are in taxable accounts, versus retirement accounts, involves capital gains that causes taxes to be paid. However, a ten percent or greater dip in the markets more than equates to the amount of tax they might have to pay. Also, this approach means they can sleep at night because they are “out of the market.”
- Change your asset allocation in 401k/403b/TSP/IRAs to more conservative
Going from an allocation that is 60% stocks and 40% fixed income to a more conservative 40% stocks and 60% fixed income, means your downside will be less and you’ll recover quicker. However, your long-term performance may be affected since you’ve reduced your exposure to stocks and therefore your long-term upside opportunity.
- Fully fund Bucket 1
Having two to three years of withdrawals needed to help fund your spending plus an amount set aside for emergencies sitting in checking, savings, CD’s and money market funds means you don’t have to worry about the stock markets, or any loss of these near term needed monies. This too, will help you sleep at night and not worry about the markets.
- Quit watching TV, newspapers, social media
Not being influenced by the media in whatever form you may have utilized in the past, will help you quit worrying about the ups and downs in the markets. Avoiding business news, and the business section of the newspaper along with modifying your Twitter follows will afford you the luxury of not knowing what’s going on in the financial markets. Less to worry about for the things you can’t control anyway.
- Buy gold, precious metals, T-bills, Swiss Francs
You can buy what we call “hard assets” which might be things like gold, other precious metals, gold coins, other currencies and government securities like T-bills to avoid any US stock market risk which means volatility of your holdings. On the other hand, you may be limited when it comes time to unload these assets. We’re not sure the supermarket will accept your gold for groceries. But, having hard assets is a strategy to avoid stock market risk, but it sometimes involves other risks that we don’t have time to explore here.