Stay the Course During Market Turbulence: 6 Retirement Investing Tips

Stock markets in the U.S. and worldwide have experienced unexpected and significant volatility in recent weeks.  

Watching declines in the value of your retirement investments, including those in a Thrift Savings Plan (TSP) or other tax-deferred workplace retirement plan, can be a nail-biting experience.  

It’s human nature to feel anxious about tumultuous returns and portfolio losses. But the emotional rollercoaster that can accompany market fluctuations may lead you to make impulsive decisions, potentially jeopardizing your long-term financial goals, such as retirement.  

You’re far better off taking a deep breath and focusing on the following six tenets of smart retirement investing. 

1. Keep a Long-Term Perspective

Although short-term declines in stock markets have occurred since the dawn of investing, returns have been positive over extended periods historically, with long-term investors typically reaping the rewards of staying calm despite temporary downturns. 

Your approach to retirement investing should reflect this reality. This holds true even if you plan to retire within a few years. After all, you won’t spend your entire nest egg on the day you retire; you’ll want to keep most of it invested as a generator of growth to carry you through the rest of your life. And the rest of your life is likely to be a long time.

According to the Social Security Administration, the average man who is 65 today can be expected to live another 16.95 years, while the average woman who is 65 can be expected to live another 19.75 years. 

Explore WAEPA’s Federal Retirement Planning resources > 

2. Focus on Asset Allocation

Pay attention to your retirement asset allocation, which refers primarily to the way your invested money is divided among different asset classes, including equities (stocks and stock funds), fixed-income investments (such as bonds) and cash equivalents (money market instruments). Your asset allocation will be the main factor behind your investment results. 

When making decisions about retirement investing, remember that if your return over a given long-term timeframe fails to exceed the inflation rate over the same period, the buying power of your nest egg will be eroded. Inflation risk can be just as damaging to your future retirement security as market risk (the possibility of realizing a loss on your investments). 

You can get help with determining an appropriate asset allocation by using the “Asset Allocation” goal on your EY Navigate™ website or mobile app. 

3. Rebalance as Needed

At least once a year – more often if your life circumstances change significantly – check to see whether your asset allocation remains as you want it to be. Do you still have the right blend of asset classes, given your retirement goals, time horizon, return objectives, and risk tolerance?

Because different assets produce different investment results, over time, your portfolio may drift from the asset allocation you want. This can happen even if you continue to invest according to plan and don’t withdraw from your investments or transfer assets among them.

To address this natural shift, you can rebalance your portfolio, which means moving balances among investments to return to your intended asset allocation.  

4. Stay Diversified

You expose your savings to unnecessary risk if your retirement portfolio contains too many “eggs in one basket.” You’re better off diversifying – spreading investments across various asset classes, sectors and geographic regions. The main goal of diversification is to reduce the impact that a loss on any one asset (e.g., the stock of one particular company) could have on your overall portfolio.  

Mutual funds and funds offered by workplace retirement plans give you instant diversification by investing your account, pooled with the accounts of all other fund investors, in a professionally chosen set of multiple assets. You get even more diversification when you invest in more than one fund. However, you get a complete, diversified portfolio in a single “target-date” or “balanced” fund. Either of those fund types may serve well as your sole investment for retirement, provided that the fund aligns with your return objectives, risk tolerance and time horizon to retirement.  

Related: Financial Planning & TSP for Mid-Career Employees > 

5. Don’t Try Timing the Market

When your retirement savings get dragged down by a declining market, you might wonder, “Should I get out of the market now and jump back in later when things get better?” Generally, no – it’s better to hold tight.  

Even if you’re seeing losses in your retirement account today, remember that a loss “on paper” becomes a realized loss only when an asset is sold. And when you move your money in and out of investments in an effort to catch only the performance highs and avoid the lows, you’re playing a high-risk game known as “timing the market.” Even investment pros are rarely able to succeed at such an effort.  

Missing just a few of the best performing days in the market can significantly diminish overall returns, according to data compiled by JP Morgan. For instance, an investor who remains fully invested over a 20-year period can achieve substantial growth, while those who attempt to time the market may miss out on crucial recovery periods.

6. Seek Professional Guidance

By speaking with your EY Navigate financial planner, you can gain valuable insights and reassurance during turbulent times. Your planner can help you weather market volatility and stay aligned with your financial goals. 

WAEPA’s Free Financial Wellness Program

WAEPA members have access to a free Financial Wellness Program through our partnership with Ernst + Young (EY). This program includes access to tools and financial advisors to help manage day-to-day finances and work towards long-term goals.