Protecting Your Retirement Funds in These Volatile Economic Times
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I was reading an article on Yahoo the other day called The Biggest Victim of the Debt Ceiling Deal: Your Retirement. The article talked about how, because of the government fiasco going on right now, and the volatility not just here, but around the world caused by our debt issues, that the stock market is on continually shaky ground. A looming or actual crash or collapse of the dollar has the potential to leave millions of people nearing retirement with a fraction of what they’ve currently saved to cover expenses in their golden years.
The dangers cited in the article are real and valid, and continued bantering and indecision on the part of Congress does indeed have the potential to impact our retirement accounts for the worse. Although a crash or dollar collapse might not be as impactful for the 25-year-old with retirement savings, it could indeed destroy the 60-year-old’s chances for a comfortable life after retirement.
So what can we do to protect our retirement funds and other investment accounts from the games the government so easily plays with the U.S. economy? Here are some thoughts:
Not just within the stock market, but outside of it as well. Consider putting some of your funds into commercial or residential real estate. Or educate yourself in investing in other markets, such as Forex, timber or precious metals. The point is to not have all of your cash sitting in stocks or bonds, no matter how diverse the fund is. Consider other investment options as well, assuming they fit with your risk tolerance and level of knowledge on said investment product.
2. Move When Necessary
If you’re close to retirement, as in less than five years, now might be the time to switch to a product that, although it doesn’t earn as much, assures that you won’t lose any of your fund’s principal balance. IRAs and certain annuities come to mind. Those within close range of retirement shouldn’t be looking as much for growth as they should for protection, in my humble opinion.
3. Seek Wise Counsel for Your Retirement Investing
Unfortunately, not every investment “expert” knows what they’re talking about. A relative of mine, a mere two years away from retirement, had some supposed “professional” working to convince her to put her smallish retirement account in a super-high risk fund because “she needed to work on growing that money.” She didn’t listen, and with the volatility of the stock market at that time it was a good thing: she got laid off a short time later and wouldn’t have been able to make it had she lost any of that money.
Research thoroughly, and interview extensively, getting references for any investment professional you are considering trusting with your nest egg. They can say they’re an “expert” all day long, but the proof is in the satisfaction of their current and former customers. Also, check with financially secure and wise friends, asking who they use and if they’re happy with the monetary results they’ve been getting and the service as well. You also want to make sure and find out how they’re compensated as you do not want to be opening yourself up to an advisor who is going to push you into products that are simply meant to make them money and not you.
4. Understand the Investment Products you’re Choosing
It’s important, before agreeing to sign on the dotted line, that you understand not only the risks of the investment you’re choosing, but what the legalities are for distribution as well. We had a family member recently who had signed up years ago for an annuity, putting most all of their egg in this particular basket. They came to find out last spring that the withdrawal rules of this particular product weren’t at all what they need, and now they’re stuck with an investment that doesn’t serve the purpose they need it to at this time. Before you agree to put your money in any product, make sure you read and understand the fine print. (Editor’s note – I can’t stress Laurie’s point enough of understanding what you’re investing in. It’s incredibly vital to understand what you’re putting your money in so you can better understand the risk you’re opening yourself up to.)
Even in these volatile times, you can protect your retirement funds and keep them cozy, warm and growing while you finish out your working years and head for that life you’ve always dreamed of. It just takes a little creativity and research.
What are your tips for protecting retirement funds in a volatile economy?
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