Recent stock market fluctuations have had a negative impact on some people’s retirement accounts like 401(k) plans and IRAs. While anyone whose retirement is a ways off has time to recoup losses before they retire, if your retirement is imminent, what does this mean for you?
What steps can you take if your retirement account doesn’t recover to the balance you were hoping for by retirement? Experts offer some tips.
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First and foremost, take a deep breath and remain calm while avoiding impulsive moves, recommended Myles J. McHale, senior vice president at Cannon Financial Institute. “Hasty decisions can usually do more harm than good.”
The next step would be to log into your account and assess the actual extent of the changes. He said it’s helpful to compare the current balance to what it was in the beginning of the year and at the end of the previous quarter to get a real picture of what you’ve lost.
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After getting a grasp on the numbers, it’s time to have an honest reality check, McHale said. He recommended asking yourself, or discussing with a spouse/significant other, whether you are really retiring at the end of 2025 — or within the next 18-24 months — and assessing what changes you might need to make.
If the balance has dropped significantly, it’s worth considering delaying your retirement. While that may be disappointing if you’ve been counting on a retirement date, in doing so, even for just a year or two, “participants can significantly reduce the pressure on their 401(k) balance,” McHale said.
This means you wouldn’t need to start drawing from your 401(k) immediately, allowing the funds to accumulate and grow further.
He said that “leveraging time in this manner” can lead to substantial improvements in the retiree’s lifestyle and their overall retirement calculations.
However, Richard E. Craft, a fiduciary advisor and CEO of Wealth Advisory Group, cautioned that any “rebound” of a portfolio may not happen in just a few months or a few years. “An investment time horizon is the time over which you need the money.”
He agreed, however, that delaying retirement has several benefits. These include waiting to take the highest Social Security benefits, continuing to fund your company retirement plan and utilizing maximum “catch-up” contributions.