The stock markets have been volatile, to say the least, ever since President Trump announced widespread tariffs on most countries around the world last week. But that doesn't mean those near or in retirement need to panic.
How volatile? Case in point: on Monday the stock markets tanked, with the S&P reaching bear market territory at one point, only to reverse course for a short period of time. Once the White House poured cold water on tariff rumors, the stock markets reversed course again and continued to decline.
Retirees or those nearing retirement who are looking at their 401(K)s, IRAs and other retirement account values evaporate before their eyes are undoubtedly panicking, even if Treasury Secretary Scott Bessent says otherwise. In an interview with NBC News’ “Meet the Press," Bessent said he doesn't think retirees look at the day-to-day fluctuations in the stock market.
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But should you? After all, historically the stock market recovers from drastic sell-offs. That was the case following the great recession of 2007 to 2009 and the COVID-19 pandemic.
“The first thing is to remain calm. Don’t do anything rash, and don’t make a change based on fear or volatility that could derail a long-term plan,” says Bill Van Sant, managing director at Girard, a Univest Wealth Division. “You want to really take the time to understand what you're invested in and know how broader factors like tariffs may impact your holdings.”
Should you make changes to your retirement holdings when the stock market is tanking?
When it comes to responding to market volatility, the two typical responses are action bias or stick your head in the sand, (otherwise known as the ostrich effect) and ignore the news.
While action bias may make you feel in control, you are really mostly relying on your gut or emotions to drive decision making, said Michael Liersch, head of Wells Fargo Advice and Planning. “In finance, this can lead to buy/sell/hold decisions that aren’t based on facts or analysis, but instead on other factors like fear, concern or herd following.”
Ignoring the news can also be costly, if your portfolio isn’t well diversified or is overweight a sector that is taking a big hit.
At Girard, Van Sant says clients who are diversified, while not immune to the bloodletting in the markets, aren’t seeing their portfolios get hit as much as those who aren’t diversified. After all, bonds and international stocks have been performing well, he says.
In markets like this, Van Sant says the most important thing to do is have a conversation with a professional (if you have access to one) to make sure your portfolio is well diverse.
From there, revisit your financial plan and assess how the volatility has actually impacted your holdings. While the markets have registered thousand point-plus declines for the last three days, your portfolio may not be taking that much of a hit.
“By becoming more informed about your financial standing, you can minimize any actions that could jeopardize the overall plan,” says Van Sant.
”For instance, if you have enough cash on hand to cover up to a year of expenses, you’re in very good shape and can likely ride this out. If cash is tight and bills are coming due, it may make sense to liquidate part of the portfolio — but only after speaking with a professional.”
Should you rethink your retirement goals when the stock market is selling off?
Now is also a good time to evaluate your short-, mid- and long-term financial needs, concerns and goals, noted Liersch. Getting specific on exactly how much you need and when you'll need it can help create clarity and hopefully minimize the panic.
Even if you are already in retirement, it's important to remember that you can’t look at retirement as a single point in time, but rather a journey that can easily last twenty plus years. Keeping that perspective in mind can help keep you grounded.
“You don’t want to make short-term decisions based on fear that could negatively affect the rest of your retirement,” says Van Sant.
“Your portfolio is meant to last through your entire retirement. The market has shown time and again that volatility happens. But what also happens, 100% of the time, is that time heals everything. Historically, pullbacks happen every year, and the markets recover much faster than most people expect.”
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