Disaster-Proof Your Retirement Plan

None of us have a crystal ball that can predict events on Wall Street, but we do know that the stock market tends to be volatile and unpredictable at times. If you’re concerned about protecting your assets, the time to act is before a market downturn. Schedule a consultation with your financial advisor, and consider the following methods to disaster-proof your retirement plan.

Analyze your asset allocation. Ask for a run-down of your asset allocations, so that you can get a clear idea of how your money is invested. Every situation is different, of course, but most people diversify their portfolio across a mix of stocks and bonds. You may also have some cash equivalents in your portfolio.

Estimate your worst-case scenario. Remember, the point is not to predict the stock market. You just want to get a good idea of your level of risk. If your investments focus heavily on the stock market, you need to be aware of how much money you stand to lose in a serious downturn. And of course, you should also be aware of how much of your money is protected in relatively low-risk investments. Work with your financial advisor to calculate your “worst case” scenario.

Estimate the impact. Given your current mix of investment options, what is the estimated long-term impact of a major market downturn? Compare this number with the amount of money you absolutely must have to retire. Are you risking too much?

It’s important to remember that low-risk investment options tend to carry the potential for less growth. On the other hand, high-risk options can also be more rewarding when the market is performing well. Everyone’s situation is different, but the idea is to make sure your investment fund is protected enough that the worst-case scenario won’t ruin your retirement. You can accomplish this through careful consultation with your financial advisor and in-depth analysis of your current portfolio.

14099 – 2015/2/13