Understanding market fluctuations can help you protect your savingsThis content is categorized as:
Do the stock market's ups and downs make your stomach churn? You are certainly not alone if they do, but it's important to remember that market fluctuations are natural. Understanding them and what history has shown us, as well as having a sound financial plan, should help you withstand periods of market volatility with more confidence.
A closer look at market behavior
When it comes to your finances and making money decisions, your emotions sometimes play a significant role in the choices you make. Sometimes this can be a good motivator. However, if you're feeling anxious, especially when it comes to the stock market, you may unknowingly create roadblocks to your long-term financial success. Remember that knowledge is power. The more you understand about economic trends, the less overwhelming it may feel when the market takes a sharp drop.
A bear market is a loss of 20 percent or more over a sustained amount of time — typically two months or more. But keep in mind the stock market has been up more than it has been down. For example, the S&P 500® from 1950 to 2019 was up 53.7 percent and down 46.3 percent of the total days in that period, with the percentage of positive days exceeding negative ones in every decade.
Whereas a bull market occurs when stock prices increase 20 percent or more and often follows a bear market. Even if there is not a rapid upswing with each dip, history tells us the market eventually recovers, with stocks increasing over the long term. One of your strongest defenses against market volatility can be creating a sound financial plan that is both diverse and flexible.
Developing a flexible financial strategy
"As market conditions fluctuate, so do one's goals, strategies and timelines between initial planning and retirement," points out Mike Downing, Chief Operating Officer for Athene.
Your financial professional can help you create a financial plan that targets allocations to long-
term goals, while still giving you flexibility as needs and retirement timelines change.
Creating a diversified portfolio that matches your time horizon, goals and risk tolerance can help reduce the impact of market-related losses. Plus, staying focused on the bigger retirement picture allows you to keep market changes in perspective.
"As market volatility and inflation continue to rise, it's crucial for financial professionals and retirement savers alike to debunk the myths and truly understand the benefits and functionality of annuities," adds Adam Politzer, Chief Product Officer at Athene. "Faced with changing variables, annuities can help provide peace of mind by protecting savings and creating a lifetime income," adds Downing.
Allocating some of your savings to a retirement income solution, like a fixed indexed annuity (FIA), provides you the opportunity to grow your assets, while keeping that money protected from loss due to market downturns. Meeting regularly with your financial professional can help ensure your retirement strategy stays on track. If an allocation no longer reflects your financial goals, or if your retirement date changes, you can rebalance the portfolio to better align with your needs.
Creating income for life
A recent study from Athene found that 55 percent of Americans are worried they will outlive their retirement savings. With current life expectancies, a 65-year-old man could expect to live until age 89 and a 65-year-old woman may live to age 92. Including guaranteed income solutions in a financial portfolio can generate a steady "retirement paycheck" that helps guard against the risk of outliving assets. For example, a FIA provides growth opportunity and protection from market losses stemming from market downturns, but it can also provide a source of guaranteed retirement income for life.
When the market downsizes in the future, your immediate reaction may be fleeing to safety. Instead, talk with your financial professional, who's dedicated to keeping your plan on track so you can retire your way. While no one can control how the market behaves, understanding market volatility and designing a sound financial plan tailored to your goals can help minimize the effects of a down market and protect your savings in turbulent times.
This information is brought to you by Athene — where unconventional thinking brings innovative annuity solutions that can help make your retirement dreams a reality.
Guarantees provided by annuities are subject to the financial strength of the issuing insurance company. Guaranteed lifetime income is available through annuitization or the purchase of an optional income rider for a charge.
Fixed indexed annuities are not stock market investments and do not directly participate in any stock or equity investments. Market indices may not include dividends paid on the underlying stocks, and therefore may not reflect the total return of the underlying stocks; neither an index nor any market-indexed annuity is comparable to a direct investment in the equity markets.