Retirement in a Recession: Stay Calm, Stay Invested

Navigating Retirement Accounts During a Recession: A Guide to Staying Calm

Your Retirement Accounts: A Source of Comfort Amidst Chaos

In times of economic uncertainty, it’s natural to worry about your investments. But, here’s the good news: your retirement accounts don’t have to be a major concern. In fact, they can be a source of comfort amidst the chaos.

Understanding Your Brain’s Response to Market Volatility

When we see our retirement account balances fluctuate, our brains go into “fight or flight” mode. This primal response is designed to protect us from danger, but it’s not exactly helpful when dealing with investment markets. To achieve true calm, you need to understand what you’re invested in and how your brain might be working against you.

Two Key Questions to Ask Yourself

When it comes to your retirement accounts during a recession, there are two key questions to consider: Should you change your investment strategy? And should you keep making contributions to your retirement account?

Question One: Should You Change Your Investment Strategy?

The answer is: it depends, but probably not. If your long-term goals and risk tolerance haven’t changed, neither should your investments. Making big changes during times of volatility is generally not wise. Think of your investments like a home – you wouldn’t try to sell it just because the market value has dropped.

The Value of Stocks

A stock is a share of ownership in a company, and its value can fluctuate. But, just like a home, a stock is a tangible thing that exists. When the value of an investment goes down, our brains assume it will continue to drop. This is called recency bias, and it’s a dangerous assumption to make. Remember, you invested in the stock market for the long-term, not for short-term gains.

Question Two: Should You Keep Making Contributions to Your Retirement Account?

The answer is: it depends on your current financial situation. From an investing strategy standpoint, the answer is yes – continue to make contributions and invest for the long-haul. However, you need to consider your personal financial situation. If you’re unsure about your employment or cash reserves, it may be wise to redirect your contributions to an easily accessible savings account.

Understanding Retirement Accounts

Remember, a retirement account is not an investment – it’s an account that holds investments. These accounts exist to provide tax benefits for money saved for the future. If you need to access money in a retirement account, there may be penalties, taxes, or both. Always check with a tax professional before tapping into one of these accounts.

Getting Started with Investing

If you’re new to investing, it can seem intimidating. But, with the right approach, it can be a powerful way to grow your money. Consider working with a financial services company like Fidelity, which has over seven decades of experience helping people reach their money goals. With their no-nonsense approach to investing, you can start building your wealth today – even with as little as $1.

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