Market swings rattle retirement plans, advisor says don’t panic

SACRAMENTO, Calif. — Many people are rethinking their retirement plans as the war in Iran drives up oil prices, increases market volatility and raises costs.

But Joseph Eschleman, CIMA, president of Towerpoint Wealth, said markets don’t move in straight lines and what people are seeing now is a reset, not a collapse.

“Market pullbacks, typically, are temporary,” Eschleman said.

Eschleman said downturns can actually create opportunities for people who are still contributing to their retirement accounts.

“This is the best time to be adding to a retirement account or a 401k plan,” Eschleman said. “May not feel like it, but when we’re seeing a decline in the market, that means prices are cheaper.”

Eschleman said when markets dip, retirement accounts usually dip too. While those losses can be painful, he said they remain on paper unless someone withdraws money.

For retirees already relying on 401(k) money, the situation can be more difficult.

“If we’re already retired, and we’re not adding any more to the 401k account or to the retirement plan account, this can be a lot more painful for those who are using the money inside the 401k plans,” Eschleman said.

He said withdrawals during a downturn can lock in losses and increase fears about running out of money.

“If I’m taking a withdrawal during a downturn, that could be locking in a loss during that downturn, and it does trigger that fear of ‘Am I going to run out of money?’” Eschleman said.

Eschleman said retirees do not need to panic, but they do need to plan.

He recommended maintaining a cash buffer worth 12 to 24 months of withdrawals.

“What that does is it allows those individuals to continue to take their monthly withdrawals, but they’re not forced to sell stocks during a temporary downturn,” Eschleman said.

Eschleman also said some people may want to revisit their asset allocation and consider a more conservative mix if market swings are becoming too stressful.

“If you’re losing sleep and just at your wits end, it may pay to take a more conservative approach that has less exposure in your 401k account to the stock market,” Eschleman said.

For people who are still contributing to a 401(k), Eschleman said it is important to stay disciplined and avoid trying to time the market.

He said people should consider increasing contributions, taking advantage of employer matches when possible and focusing on long-term goals over the next five to 10 years.

Email your money questions to ABC10 anchor Lora Painter at LPainter@abc10.com.

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