#1 Market Volatility Safeguard For Your 401(k)

 In Ozarks Live

#1 Market Volatility Safeguard For Your 401(k)

Remember when you started your first big kid job with your first big kid retirement plan?  Congress designed the 401(k)  plan as a retirement savings vehicle on November 6, 1978.1   After you got your big account set up, did you review it with a financial planner or have time to go to the yearly work meeting about your plan?  Set it and forget it, is popular in the 401(k) world.  Some people don’t realize the huge benefits of the company match or the compounding that occurs by starting investing as early as possible.  Starting early is sometimes the best advice I can give.  Today, I’m going to discuss options to safeguard your 401(k) from market volatility as you near the 7-5 years before your preferred retirement year.

Risk Types

I talk a lot about the volatile markets, and truth is, we have ‘known’ risks such as the election, unemployment reports, or a rising deficit.  Then there are surprises of unknown risks like COVID- 19, September 11th or even Pearl Harbor.  If you are a few years from retirement your 401(k) may not have time to recover from a known or unknown risk before you need to start taking income from your account.

Combating Market Volatility

Most 401(k) plans offer an option of an in-service rollover.  ‘In-service’ refers to the fact that you are still employed and ‘rollover’ refers to moving a portion of your earnings into an IRA.  The plan guidelines may allow you to roll out a large portion of your investment to safeguard the growth of your nest egg.  Then you would be able to invest the IRA into a safer investment vehicle, which rolls into my next point, switching your mindset from investing for growth to keeping your nest egg safe to produce income.  I discuss this in-depth in my blog Investment Planning Vs Retirement Planning.   If you are over 59 ½ an in-service rollover may be a solution for you.  Nearing retirement, you have run out of working years to earn back any significant market losses of your 401(k) investment.

Job changes

If you find yourself in the unfortunate position of getting offered a buy-out, terminated or being laid-off near retirement you have a few different options for your plan.  Click here for some options that may be available.   If you are nearing retirement I would look into an in-service rollover.

Our #1 fear is outliving our money, right?  From the youngest to the oldest American workers – GenZ to Baby Boomers – their greatest fear about retirement is “outliving my savings and investments.”  That’s according to Transamerica’s 2021 Retirement Survey, where 42% of respondents picked that as their biggest worry, outweighing concerns about physical or mental decline.Moving a portion of our money away from market volatility will help with keeping more of it for the long haul and not becoming a victim of a Wall Street algorithm!

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Sources:

1https://en.wikipedia.org/wiki/401(k)

2Transamerica Retirement Survey, https://transamericacenter.org/docs/default-source/retirement-survey-of-workers/tcrs2021_sr_four-generations-living-in-a-pandemic.pdf

Investing involves risk, including the potential loss of principal. Our rm is not affiliated or endorsed by the U.S. government or any governmental agency. The Resource Center, Inc. is an independent financial services rm that utilizes a variety of investment and insurance products. Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and The Resource Center, Inc. are not affiliated companies. 1082142 – 10/21

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