Fluctuations in the stock market and changes in the overall economy can cause the balances in your retirement account to swing wildly. That might be stressing you out, especially if you’re getting close to retirement age. You might be wondering if you should change your investing strategy so you’ll have enough money to live on after you stop working.
It’s Generally Best to Stay the Course
It’s normal for the stock market to go up and down and for the economy to go through cycles. Over time, the stock market generally goes up. If you’re decades away from retirement, you’re putting enough money into your account, and you’ve got a diversified portfolio with an appropriate mix of assets, you should be able to stick to your current strategy and wind up with enough to cover your expenses after you retire.
You Might Need to Make Adjustments If You’re Near Retirement Age
As you approach retirement, you should shift to a more conservative mix of investments. That means your portfolio should have a smaller percentage of stocks and a larger percentage of bonds and other assets that are less volatile.
Review your current and projected account balances, think about how much you’ll need to withdraw each year, and figure out if you’ll have enough money to cover your living expenses. If you’re worried that you won’t, consider increasing the amounts you contribute each month in the final years before retirement. That might require you to cut back on some of your current expenses or look for a part-time job to boost your income.
Another option is to continue working a bit longer than you intended. You can stay in your full-time job for an additional year or more, or you might prefer to retire from your current job as scheduled and then work part-time.
Remaining in the workforce can give you an opportunity to boost your retirement contributions, as well as more time for your balances to benefit from compound interest. The final years before retirement are when investors typically reap the greatest returns from compounding.
You can also wait longer to begin collecting Social Security benefits. You’ll receive a larger payment each month, which means you’ll be able to withdraw less from your retirement account.
Get Professional Advice
Everyone’s financial situation is unique. Review your current portfolio balance, think about when you plan to retire and how much you’ll need to cover your expenses, and figure out if you’re on track. If you have any questions or concerns, consult your financial advisor.
