NEW YORK (TheStreet) -- In the past month or so the S&P 500 dropped about 50 points, leaving retirement investors wondering if their portfolios are perched in the right places.
"Many investors were lulled into a false sense of security as the market was slowly improving and staying steady in recent months," says Nicole Mayer, a financial planner with RPG-Life Transition Specialists. “Last week’s shifting stocks reminded all of us that the market is nothing if not uncertain. That is why it is absolutely crucial to make sure that your investments are in line with your financial goals.”
Basically, that means establishing long-term financial goals, working with a financial professional to lay out a blueprint. To set goals, you should be asking:
- When do you want to retire?
- How much do you need to retire?
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- How much risk you can assume and still be able to sleep at night without worrying about your retirement portfolio?
Once you've set goals, Mayer says there are three investing principles you should keep in mind to protect retirement savings:
There are no "one-size" approaches.
Your financial adviser should make your portfolio according to your specific needs and goals and respecting the amount of risk you are prepared to take. That could mean absorbing more risk when you are young (as you have more time to recover from downward markets and sliding fund performance) and shifting portfolio assets when you’re older and nearing retirement into more conservative investments such as Treasury bills to preserve those assets and keep them out of harm’s way.
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Watch for "general guidelines."
Every armchair stock trader has a "sure thing" for you to buy in the stock market, but those "experts" don’t know your unique retirement needs and expectations. "You should set your own specific goals for your future and find out what you need to do to get there -- like how much you need to save and the return you need on your investments," Mayer says. After that, it’s all about balance and generating enough plan assets with as little investment risk as possible.
Job No. 1 with any retirement portfolio, in choppy markets or not, is to not lose money. Why? Because it’s not easy to regain plan money that leaves your retirement account. “If you lose 30% in your investments when the market tanks, it doesn’t matter how old you are. In order to make back the 30% you lost, you will need to earn 43% just to make back what you lost and get back to square one,” she says.
Mayer advises not to panic when markets melt away and to always know what stocks, bonds and funds make up your retirement plan and why they’re in the plan in the first place. Do that and you’ll be taking a big first step in protecting your financial future no matter what’s happening in the financial markets.