The current COVID-19 crisis has brought the entire world to a standstill. Withthe lockdown in place, the stock market has taken a massive hit. The crashing stock values and the fear of recession has negatively impacted almost all investor portfolios. The worst affected bunch are older investors who are closer to retirement and do not have a lot of time on their hands to make up for the losses. If you too are approaching your retirement age and have had your savings depleted, here are a few retirement planning tips to help you sail through these unprecedented times.
Refrain from liquidating your investments
Selling at present will be akin to selling at a loss. As an investor, remember that the losses are notional till the time you are invested, but if you sell those investments at the current price, the losses become real. Instead, focus on reducing expenses and increase your savings further. Remember, by nature, these assets are designed to grow to fulfil long term needs. As a result, liquidating these should by default be the last option on your list.
Turn to spending your liquid capital
In this period of uncertainty, turning to your liquid capital is a better option than liquidating investments. If you have been saving away cash in an emergency fund to cushion you from unforeseen circumstances, now would be the time to consider spending it. Though the idea of using up the precious savings to keep oneself afloatmay seem terrifying to most people, it is actually a wise move to buy more time for your equities to grow as you approach retirement. Indeed, every day counts!
Revisit your portfolio to understand the balance and exposure
Before the pandemic outbreak, you must have had a pension plan in mind to take care of your expenses after retirement. You had set your goals and used a retirement calculator to figure out the financial corpus you require for a worry-free retirement. Now is the time to check if your allocation of funds is well balanced so that you do not have to turn to your equities for cash. Specifically, it is important to look at the balance between bonds and stocks. It would also be useful to have a dynamic product such as ULIP in your pension plan portfolio. Some ULIPs provide the flexibility to move money from equity to debt and vice versa as and when required. You could study the market conditions and diversify your portfolio accordingly to yield maximum benefits.
Adjust your budget
If you find yourself caught in a corner with less cash in hand, focus on developing a new strategy and rethinkyour budget in order to control your spending. Lessening expenses is a wise call anyday compared to pulling from your investments. Use the current COVID 19 crisis to develop habits that are less expensive, such as buying only essential items, eating at home, opting out of a vacation, etc.
With the stock market crashing and the notional losses skyrocketing, it is indeed a challenging time for older investors who are approaching retirement and have over a long time, aggressively worked on their retirement plan. However, to recoup losses, acting smart is crucial. Focus on the long term benefits you aim to earn and curb yourself from being rash with your investment decisions. Readjust your budget to save more and work on a diversified retirement portfolio that has a balanced mix of investment products specially designed to cushion your retirement savings so that you can enjoy the worry-free retirement life you have always dreamed for yourself.