Want to transfer your retirement savings from the stock market to the CD? Read first
Don't let temporary market declines undermine your investment strategy.
The stock market has been in ups and downs, but the whereabouts of last month were enough to shock any investor. Despite the market recovery, many people still see their portfolios being phased out overnight, especially if there is a portion of their pension funds. As the economy remains shaky, some wonder if they should transfer their reserves to low-risk assets such as deposit certificates.
Experts say it's not that fast.
“CDs can feel like a safe haven in this environment because they provide predictability, which can be attractive when everything else is shaking,” said Taylor Kovar, 11 Financial certified financial planner and CEO. But, he warned: “There are some trade-offs.”
You need to know this before making any intense moves.
Read more: Simple $1 tips helped me pay off my debt and retire on my terms. This is how it works
Is there a long way to go to retire? Adhere to the current strategy
Stock market volatility is frightening, but the wise investment strategy factor in the decline. The S&P 500 historically has an annual yield of about 10% for investors who have deposited there for decades. If you have many years before retirement, you can wield the waves and make money in the long run.
“One of the biggest retirement risks is being too conservative,” said CFA, head of Marina Wealth Advisors. “Retirement can last for more than 20 years, so being conservative too early and you may run out of portfolio too early.”
It is wise to keep some of your retirement savings in low-risk assets, but the amount depends on many factors, including your age and risk tolerance. A financial consultant or robo-advisor can help you create the best strategy for yourself.
Retirement soon? It might make sense to transfer more money to CDs
If you are close to retirement – or have retired – you have less time to recover from the stock market decline. Therefore, your priority should be to reduce the planting of nest eggs, and to retain it. In this case, allocating more savings to low-risk fixed-income assets such as CDs and bonds may be a smart move. Likewise, a financial advisor can help you determine the best route.
Don't succumb to panic
No matter your age and investment goals, don’t let the economic headlines let you make any radical changes to your retirement plan.
“For investors who have been wasted recently, I would say this: Don’t make emotional decisions for short-term volatility. Take a step back, review your timeline, and make sure your investment matches today’s goals and risk tolerance, not five years ago,” Koval said. “A well-balanced plan usually includes stocks and CDs, one for growth and the other for peace of mind.”
