You're nearing retirement and then the financial markets plunge downward so quickly it's dizzying. It's natural to feel disoriented. As we work our way through coping with COVID-19, the volatility of the market reflects widespread uncertainty.
Right now, it's especially important to look at the big picture. Based on history, it's reasonable to assume markets will rebound and recover. Economies show their resilience over the longer term. It's more difficult to see the upside when they are down, but consider what has happened in the past.
When the credit crisis of 2008 caused markets to shudder, many investors feared there would be no recovery, given that it was unprecedented in their lifetimes. Then it was followed by a remarkable bull market run of 11 years.
The 9/11 attacks on the United States in 2001 reverberated around the world and pushed markets down sharply. It shocked everyone because it, too, was an event that many people had never previously experienced. They had no personal reference point to guide their actions moving forward. Yet, the markets recovered quite quickly.
We are again in uncharted waters with COVID-19 and it's difficult to tell how long it will last.
Stay the course in general
The best way forward right now is to stick to your financial plan and stay the course. Anyone tempted to sell off their investments and hold only cash, perhaps at a significant loss, should be aware of the corrosive power of inflation over the longer term, which can strip cash of its full value.
It's important to remember that you don't need 100% of your money right when you retire—someone who is retiring at age 65 should still think long term. It's important to stay the course and avoid making financial decisions based on emotions.
The financial planning that you have done before the volatility, the decisions that you make now during it, and the time when the markets and life return to normal are all considerations in your strategy.
If you're nearing retirement, depending on your situation, there may be issues to consider that younger investors might not. For example, you may not have as many years of earning and saving ahead. Or you may not feel comfortable waiting out losses. Or it might push your time horizon for retirement outward by a few years.
There is a hidden upside to your journey so far. Aging has taught you that you can overcome difficulties that may have seemed overwhelming or even catastrophic at the time. You have shown that you're resilient and, when necessary, you can adapt and even thrive.
If you plan to retire within the next five to 10 years, you may already have some assets that will provide you with future income. This is not the time to sell off stocks. Rather, it could be an opportunity for you to examine your plan and consider your time horizon.
You'll want to try and keep your debt manageable.
But make some course corrections if necessary
Now might be a time when you adjust your lifestyle in accordance with your retirement plan, resisting the urge to spend and perhaps, if you have a crisis budget, putting it to use.
There are Canadian federal government and provincial government financial assistance programs underway during COVID-19 that you may qualify for. Various services are offering the opportunity for their customers to defer or rejig payments for a time.
Servus has launched a financial relief program to support members who may be experiencing financial impacts due to COVID-19. Servus's program includes up to six-month payment deferral on existing mortgages and loans, on a case-by-case basis.
Reach out to your advisor
This is the time when speaking with your advisor is key, especially if you feel any course corrections are necessary. They're monitoring the situation daily and have strategies in place to help you.
Rebalancing your portfolio periodically may be a beneficial strategy, depending on your personal needs. You'll need to consider your risk tolerance based on your time frame.
Depending on your time horizon for retirement, you may already have a strategy that considers diversity. For example, the right balance between stocks, bonds and cash could provide you with a measure of security and income flow moving forward.
Your advisor can help you to examine what's working for you at this time in your investment plan and consider whether there is any potential to make adjustments.
If you haven't yet started to plan for retirement, whether you have investments or not, you might want to consider starting one with an advisor. World events that cause the markets to churn are reminders that planning for retirement is an important, and sometimes urgent, issue.
Staying informed and aware is the best thing you can do to protect your health and your money. Keep up to date with Servus's response to COVID-19.