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Many people look forward to retirement as a joyful time where they can travel and fulfill other aspirations. Beneath this happy time, however, lurks the very real concern of running out of money. Without a source of income, retirees realize that their savings need to last for the rest of their lives. A sequence of returns risk is a significant risk to assets that are exposed to the markets, as losses early in retirement can deplete a portfolio more quickly. Unfortunately the direction of the market when we retire lies outside of our control, but it is possible for individuals to take control of how they react when their portfolio experiences a bad sequence. In the case of a poor sequence, consider these strategies to make retirement savings last. 

Diversify Your Portfolio 

A diversified portfolio helps to reduce volatility. Portfolios concentrated with a single asset class are more vulnerable to economic shifts, so it’s a good idea to have a mixture of different investments such as stocks, bonds, annuities, real estate and more. Within stocks exist mutual funds that invest in differently sized companies, and there are even sector-specific categories. In the event of a bear market, a diversified portfolio is designed to have some investments that are still performing positively with a reduced exposure to assets that aren’t. 

Consider an Annuity 

An annuity is a contract guaranteed by insurance companies that provide income for a specified period, along with protection of your principal. These can often guarantee an income stream for your entire lifetime, and this portion of your portfolio can be used to cover necessary expenses while the rest of your portfolio can be more aggressive and strive for higher growth, as your risk tolerance allows. 

Consider Your Home as an Asset

 Homeowners with equity can consider opening up a home equity line of credit. With this option, you will have access to funds but may be permitted to pay only interest on the amount you withdraw. Combined with an adaptive withdrawal strategy, you can access this line of credit when the market is in decline. When the market begins to rise again you can pay back the amount borrowed. This strategy does mean using your home as collateral, so you need to discuss this with a financial professional before deciding if this approach makes sense for you. 

These strategies are not the be all, end all of retirement planning, but they can help you respond wisely to the fluctuating market. Knowing how to respond to the market can help you avoid knee-jerk reactions that can negatively impact your long-term strategy

Investing involves risk, including possible loss of principal. No investment strategy, such as diversification, ensures a profit or guarantees against losses in a declining market. Annuity guarantees are backed by the financial strength and claims-paying ability of the issuing company. This article is provided for informational purposes only and should not be deemed a recommendation or advice to an individual’s unique situation.