Retirement Planning Blog

Answers to Frequently Asked Questions Regarding Financial Planning

Is the Stock Market Overdue for a Correction?

Posted by Mark Snyder | Sep 14, 2017 1:51:16 PM

None of us knows if or when the stock market will suffer a so-called “correction.” What we do know is that when managing your investments, look beyond the volatility of the day focusing instead on adhering to your strategy.  Continue to save, invest and maintain an investment mix that is appropriate for your time horizon, health/personal status and risk tolerance. These are the variables you can control and the most likely to determine whether you succeed at reaching your investment goals. Paper losses only become real when the security is sold and volatility is the market’s way of testing your level of commitment and courage. And volatility does not equal loss, unless you sell.

          A retirement spending survey by T. Rowe Price revealed that many recent retirees who have 401(k)s and/or rollover IRAs have accumulated significant nest eggs, and most say they are faring well, both financially and emotionally. Meanwhile, workers in their 50s who are participating in an employer 401(k) have also accumulated significant assets, but feel more anxious about retirement than those who have already retired.

Many have considerable savings: Recent retirees reported median household assets (investable assets plus home equity minus debt) of $473,000, with 48% having $500,000 or more in household assets. Of their investable assets, 38% was in stocks and stock mutual funds, 13% was in asset allocation mutual funds, and 31% was held in cash. More than eight in 10 (82%) of the retirees own real estate with a median of $191,000 in home equity.

Work is part of the picture: 21% are working either part-time (16%) or full-time (4%). Another 14% are retired but looking for work.

Those with a withdrawal plan are withdrawing close to 4% of their assets annually: 48% of retirees indicated that they have a withdrawal plan, and the median retirement withdrawal among them was 4% of their investable assets within the past 12 months. But the average does mask some extremes, including nearly a quarter who withdrew 8% or more and over a quarter who withdrew only 1%.

Living on less: Nearly three years into retirement, retirees report living on 66% of their pre-retirement income on average.

But that has not translated to dissatisfaction with their lifestyle: 57% report they live as well or better than when they were working. And 85% agree with the statement, "I don't need to spend as much as I did before I retired to be satisfied," including 37% who say this describes them a "great deal." Most (65%) like not spending as much and see it as a new found freedom from "keeping up with the Joneses," with 25% saying this describes them a "great deal."

They feel satisfied: 89% are somewhat or very satisfied with retirement so far. Additionally, 74% say they are somewhat or much better off financially compared with how their parents lived when they were their age.


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Topics: Stock Market

Written by Mark Snyder