Retirement Investing for Retirees Amid the Downturn

Dismal economic news, combined with mounting unemployment and growing worries of the uptick in virus cases, continues to shake up the stock market.

Americans are now faced with the reality of living in a recession and must reevaluate their daily personal finance practices as well as their long-term financial planning.

The stock market has been very volatile since February, and investors are stuck not knowing what's going to happen from one day to the next. This unpredictability causes uneasiness, and the most challenging part is there's little that can be done about it.

This environment is unique, says Scott Thoma, principal at Edward Jones in St. Louis, "We saw a 35% decline between February and March and since then the rebound has been equally as swift; currently, even with the volatility, we're still up almost 40% from the bottom."

[READ: How to Pick Emerging-Market Stocks.]

As the pandemic was growing and having severe ramifications on the market, resulting in a recession, investors may have seen a drop in balance for their retirement portfolios.

Even though the market has bounced back since then, there are still many unknown factors associated with the pandemic. It's difficult to stay calm during a market downturn, but experts say retirees have to be comfortable being uncomfortable about future market volatility.

Investors in or approaching retirement, who are observing stock price sensitivity due to the recession and recent societal events, are adjusting their sentiment on the current market outlook and responding in different ways about how to deal with their investments:

-- Investing in your 60s.

-- Knowing your investment strategy.

Investing in Your 60s

Instead of panic, the reactions among older Americans were balanced; many baby boomers stayed the course with their portfolio investments as a result of the market slump.

The behavior of those age 65 and older turns out to be pretty rational, says Pam Krueger, founder and CEO at Wealthramp, a free online service that matches consumers with vetted, fee-only financial advisors in Tiburon, California.

Krueger says those reactions jive with Wealthramp's findings in an April survey.

"We surveyed our network of fee-only, fiduciary financial advisors (retirement specialists) who reported that more than three-quarters of their clients will retire right on time, despite the economic turmoil," Krueger adds.

Considering retirees are living longer, their concerns about saving enough money for daily needs and having a sustained income stream for the future are certainly valid, especially amid a recession.

As a retired investor, if you are making any changes to your portfolio, experts say, it should be rebalancing, if needed. During the downturn, investors have been either adding more stocks because they were underweight and not aligned with their goals or removing from their equity positions for the same reason.

One of the ways to address a potential portfolio realignment is to examine your income needs versus expenses. Developing a financial strategy that fits depends on having a balance between those two components. This fundamentally entails making sure your asset allocations align with your risk tolerance and long-term financial goals.

"One of the things we try is to assure there is an appropriate amount of cash on hand to prepare for emergencies," Thoma says.

Thoma uses a three-pronged strategy in his investing approach for retirees -- with managing risk tolerance being at the forefront, followed by accounting for short-term and long-term financial needs and finally having a conservative spending strategy to safeguard your cash balance.

He says it's all about having enough cash on hand for emergencies.

"What we do with our retired clients is have a year's worth of income in cash to match income needs and to ensure their near-term necessities are comforted to provide confidence that no changes should be needed in their portfolio."

[See: 10 Things That Could Derail the Stock Market Recovery]

Staying With Your Investment Strategy

The recent downturn has highlighted the need to plan for the unexpected in addition to staying on top of your overall investment strategy.

It's important to ensure "emergency cash, life insurance and legal documents are up to date because all these aspects are critical to move through ups and downs," Thoma says.

Make sure your portfolio is balanced for the next five to 15 years in retirement, says Tom Zgainer, founder and CEO of America's Best 401k in Scottsdale, Arizona.

While your portfolio should generally slant toward a more conservative balance, there's a danger in fully relying on cash. "Don't go to cash because you will lose out on the time value of money and the beauty of compounding interest," he says.

Regardless of what stage of life you're in, now is a great time to look at how you invest and make sure you're on the right track in terms of your risk management and appropriate portfolio allocation. That holds true whether it's in your brokerage account or an individual retirement account, such as a Roth IRA or traditional IRA.


Planning for financial security in retirement requires preparation, dedication and sometimes a bit of sacrifice during a recession.

Living within your means and understanding that budgeting amid a recession in your retirement years can be just as important as saving in your pre-retirement years can only strengthen your retirement stability.

Furthermore, adopting healthy financial habits will help manage your retirement planning needs for years to come.

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