Retirees and those close to retirement are navigating the current economic and market volatility differently waiting for a smoother situation than those who have time by their side.
Depending on the type of savings and the balance in their account, some people are feeling more stressed than others and are adopting different strategies to avoid noise.
Just one day after the biggest one-day fall of the Dow and S&P 500 since 2020, the stock market has moved closer to its first bear market since the onset of the epidemic.
But one thing that seems to match the seniors is the deja vu feeling.
“A lot of seniors are doing the same thing we’ve always done until we get back to a reasonable time,” said Cliff Ramsay, an 82-year-old retired South Carolina man who took care of his retired wife with Alzheimer’s.
He recalls that in 1955 President Dwight Eisenhower’s heart attack persuaded the stock market to temporarily tank. The elderly also survived the stagnation of the 1970s, the dot-com bubble and countless other economic woes over the decades.
This time too he will not be an exception, they say.
What are the seniors doing when it comes to bears?
Ramsay said he and other veterans have cut costs until inflation returns to a “reasonable rate” and markets return.
“I think there were some things my parents used to do just to save money,” he said, and he does something similar now.
Ramsay said he shopped a lot, cut out food and name-brand items of choice, set the thermostat to 75 degrees instead of 70, reduced power consumption, watched less television and turned off the lights. He also reduced the use of water in the yard.
Rumsey admits he does things that most financial advisers will cry for: he raises his tax retention for his social security so he can promise a big refund check when he files his tax return. He uses that money as a savings cushion for the year.
“I know financial advisers will tell you not to do this because you can take that money and use it, but I know myself,” he said. “It simply came to our notice then. It’s not easy with Uncle Sam. “
What should they do?
Retirees should not panic with a diversified investment plan, advisers say. Instead, focus on your long-term goals and know that if a recession occurs, they will continue to get smaller.
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“The most important thing is where we’re going with the investment,” said Shawn Pearson, AmeriPrize’s financial adviser at Conshohoken, Pennsylvania.
Daily headlines like stock market plunge, rising inflation, the prospect of sharply high rates and even shouting about the impending recession like construction and traffic on the road to your destination.
“You’ll still get there but there may be a little walk and it may take a little longer to get there,” he said. “The most important thing is that we get there. Traffic doesn’t matter. “
Although the market downturn may tempt you to sell in panic, try to stop, even if you have to reduce the considerable cost for some time.
“Diversified investments in the US and global economies go up more than downwards over time, and recover if time permits,” said Rob Williams, managing director of Schwab Financial Planning and Retirement Income.
If instability worries you, consider making small adjustments to your portfolio, say consultants.
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“You can do tweaks around the edges,” Pearson said. “If you have a fixed income investment, short-term is better than long-term if interest rates continue to rise for a year or two. If you are tech-heavy, look for some safe, dividend-paying stocks in certain sectors. But diversity is key. “
Dividend stocks have attracted Mary Johnson, a policy analyst at The Senior Citizens League, who is close to the age for the required minimum distribution (usually 72 years), or the amount you need to withdraw from almost all tax-exempt retirement accounts each year.
“Most of my retirement accounts are in dividend-paying equity,” he said. “I don’t invest in other types of equities as dividend stocks pay you to hold on to when times are bad. They tend to lose inflation during regular inflation – not including current inflation. “
Wait and don’t guess
If you are not lucky enough to have a large nest egg, Things can be tough but you can still soften the blow on what the investment might be.
“If you have limited savings and their prices are down, don’t sell for a price right now,” Williams said.
Instead, try to reduce your discretionary costs.
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A word of caution buying: You should be tempted to use as much savings as you can to “buy less” and grab the “next big thing” at a bargain price, don’t.
“If you don’t have a lot of savings, don’t bet on trends,” Williams said. “Trends are often interesting, but it gets harder.”
Provide social security and pensions
Whether it’s a pension payment or social security, you get the most out of what you earn. Social security payments are adjusted year-on-year for inflation, the biggest increase since 1982, this year to 5.9% when the cost-of-living adjustment (COLA) reached 7.4%.
COLA growth has probably helped but has not completely offset rising inflation this year. In the 12 months since April, consumer prices have accelerated 8.3%, slightly lower than the March 8.5% pace but still close to a 40-year high.
“It’s running at 65 miles per hour instead of 90 miles per hour,” Johnson said. “It still exceeds the speed limit.”
Based on consumer prices so far this year, Social Security checks could see an 8.6% bump in 2023, the biggest increase since 1981, Johnson said. Even so, owning one is still beyond the reach of the average person, as the purchasing power of seniors from Social Security checks is declining year after year, he said.
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“No matter how hard we try to plan, who ever planned that the highest inflation in 40 years would come back from among the dead like vampires sucking savings from us?” Johnson says.
Medora Lee is a finance, markets and personal finance reporter at USA Today. You can contact him at [email protected] and subscribe to our free Daily Money Newsletter for personal financial tips and business news every Monday through Friday morning.
This article was originally published in USA Today: The Beer Market and Retirees: How Can Seniors Survive the Stock Market?