Question: I’m a 60 year old widow living in Alabama, and I have an IRA that has $118,000 in it. It has lost 7% since September and I’m not sure if I need to move it into a plain retirement account or not because I can’t afford to keep losing 7% every 2 months. What will my balance look like in 4 months? I’m not sure if this issue alone makes it worth hiring a financial adviser. What should I do?
Answer: Nobody likes losing money and it sounds like you’ve lost more than you’re comfortable with over the last couple months. Pro say it’s worth consulting a financial adviser (more on that later — and you can use this free tool from SmartAsset to match you with an adviser who might meet your needs), but first we wanted to give you some perspective on your losses.
Have an issue with your financial adviser or looking for a new one? Email [email protected].
Keep in mind that markets are volatile and may be down from month-to-month or year-to-year. “That’s normal and you should expect to see losses in your account from time-to-time if you’re an investor,” says certified financial planner Matt Bacon at Carmichael Hill & Associates.
Indeed, declines are an inevitable part of investing. “To put things in perspective, the S&P 500 Index averages a 10% or more decline about every 16 months,” says certified financial planner Ryan Haiss at Flynn Zito Capital Management.
At age 60, you’re probably wondering if these kinds of losses are even more detrimental as you approach retirement. “Understandably, you feel that way — and few things cause as much stress as seeing your portfolio go down. As investors, it’s normal to think that if the market has gone down, our brain tells us that what is happening right now will continue. That’s one of the main mistakes our feelings play in investing and it’s called recency bias, but in times of turbulence, the worst decision you can make is to jump off the plane,” says certified financial planner Alonso Rodriguez Segarra at Advise Financial.
The important thing to consider is that the trend is positive over time. “The longer you stay invested, the better the chance you have of achieving positive returns and meeting your long-term goals,” says Bacon.
That said, if the dip you noticed has you worried, that’s a good enough reason to visit with a financial adviser. “It’s not to necessarily manage the investment account, but more to let you know whether you have enough saved to retire and stay retired. These kind of month-to-month changes in account value won’t be as concerning when you know that answer,” says Bacon.
Something else to keep in mind: The account isn’t usually what drives the return of the investment, it’s the investment vehicle. “There’s no [such thing as a] plain retirement account. It seems to me if you don’t know what you’re invested in or understand how or why it’s performing the way it is, you would benefit from an adviser that can explain your options and the risks associated with different investment choices and how they will help you reach your goals,” says certified financial planner Anthony Ferreira at WorthPointe Wealth Management.
CFPs, or certified financial planners, are a popular choice because in order to earn their designation, they must complete extensive coursework, pass exams, undergo thousands of hours of training and adhere to a fiduciary duty, which means they’re required to put their client’s best interests ahead of their own. (You can use this free tool from SmartAsset to match you with an adviser who might meet your needs.)
It’s crucial to consider your long-term financial goals and risk tolerance when investing. “A CFP will not be able to prevent market volatility, but they can review your existing portfolio and can provide recommendations for a portfolio that may be more suitable depending on your short, intermediate and long-term goals,” says Haiss.
Know, too, that there are other investment options available. “If you’re uncomfortable with the ups and downs in the stock market, you have the option to buy a T-Bill in your IRA for a guaranteed risk-free return in the 5% range, or move your account to a bank IRA and purchase a CD. As an investor, you simply need to decide what your comfort level with risk is and if a lower risk-free return is more palatable,” says certified financial planner James Daniel at The Advisory Firm.
Have an issue with your financial adviser or looking for a new one? Email [email protected].
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