How the Stock Market Can Help You Survive in Retirement

On a stomach-churning day in August, the Dow Jones Industrial Average dropped to an 18-month closing low in a trading session that saw the index briefly decline more than 1,000 points.

Then there was reason to celebrate: Days later, stocks recovered from losses and profits soared northward. And the up-and-down swings of the market continued into September.

With all this volatility, where do investors turn, particularly those nearing or in retirement?

Stock-driven investments are still considered to be one of the key components of a retirement portfolio, experts said. What’s also critical: knowing how much stock to hold, which stocks to own and for how long.

Why Stocks Matter

“Most people are going to want some type of growth (instrument) on their way to retirement and in retirement, since some of us could be around as long as 35 years after we retire,” said Craig Brimhall, vice president of wealth strategies with Ameriprise Financial.

Growth instruments include stock, real estate and businesses, he said. Generally, a mix of stocks and bonds are considered to be staples in a retirement investment portfolio.

Despite the turmoil that the market is experiencing now, Brimhall said, investors should view stocks as their retirement portfolio’s growth engine over the long term. Keep in mind, however, that investors’ stock holdings should lessen considerably as they move closer to their retirement date. Moving investments out of stocks can help avoid heavy losses in their portfolio just before they’re about to begin withdrawing funds from it.

Jeffrey Bogart, a registered investment advisor at Sila Wealth Advisory in Mayfield Heights, Ohio, added that stocks tend to bring higher returns, but “the price to pay for the excess returns is the volatility of the stock market.” Still, he said the “ups in the markets far outweigh the downs.”

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