Date: September 6, 2021

How to Recover from Financial Loss Right Before Retirement Age

After carefully contributing to your retirement accounts for decades, it can be quite devastating to experience a financial loss just as you prepare to retire. However, while it may feel like it, the world isn’t coming to an end. You can take steps to recover from an untimely loss, but it requires that you keep your perspective rather than surrendering to fear.

At Heritage Capital, we can help. How? Here’s an example.


When and Why This Can Happen

An investment loss can happen at any time – that’s the nature of capital markets. The economic cycle of bull and bear markets has not been outlawed and cannot be avoided. It has just become longer and deeper, both on the upside and downside. While many folks lose money (at least on paper) in a bear market, the impact is typically hardest on DIY investors who don’t have the benefit of professional financial advice. Without the input of a knowledgeable fiduciary, the investment world can at times seem scary indeed. And emotional financial decisions can have long-lasting financial impacts.


What to Do When it Does Happen

Successful market timing can be difficult, even for an experienced financial advisor. However, risk reduction and mitigation does not have to be about being “all in or out.” Many investors who were stampeded into selling their securities during a collapsing market have ruefully watched the market recover as they sat on a horde of cash. But it doesn’t have to be that way.

At Heritage Capital, we recommend the following 6 tips than can help you save your retirement when an untimely financially loss occurs.


Have an investment question? Let’s talk! Contact the team at Heritage Capital and get the conversation started.


Work With an Advisor!

The first step in recovering from a sudden financial loss in your pre-retirement years is to seek the support of a professional financial advisor. It’s hard to overstate how important it is to receive unemotional, well-grounded advice from a financial advisor who has the experience to know the right steps to take. If you needed complex, open-heart surgery, would you seek out a surgeon fresh out of residency or a seasoned veteran with decades of experience?

An accredited financial advisor has likely experienced a good number of the major stock market collapses and recoveries. Armed with an informed perspective of how volatile markets behave, your financial advisor should help you avoid the feeling of helplessness by showing you which steps to take and which to avoid. This can be the difference between saving your retirement and succumbing to loss.


Prepare a New Financial Plan with Retirement Projections and Specific Steps

Whenever you experience change, instead of reacting and panicking, it’s better to respond and update your plan. Include a series of financial projections about your retirement, based on the options open to you. Through careful discussion, you and your financial advisor can formulate specific steps to take to protect your retirement nest egg from the harm caused by precipitous actions.


Review Your Risk

If you haven’t assessed your sensitivity to risk lately, a review is an important step in determining your investment options. The goal is to allocate your assets in a way that expresses your overall comfort level with risk. To do so intelligently, you’ll need to weigh the competing risks of loss and lost opportunities. It surely is painful to watch the value of your portfolio decline, but your financial advisor can help you balance that pain against the frustration of missing a market recovery.

Risk can’t be avoided. Even keeping your money in cash exposes it to the risk of inflation. But panic selling into a collapse is a very emotional, risky and unnecessary proposition that should be avoided. Instead, bear markets give you the opportunity to make adjustments to your overall asset allocations in anticipation of the next bull market.

Read our recent blog posts:

Investing in Volatile Markets: Heritage Capital Addresses Concerns

#1 Question Asked Since the Pandemic: Am I Invested Correctly Post-COVID-19?


Consider More Tax-Efficient Investments to Help Increase After-Tax Returns

Taxes are a drag on your investment returns, and often needlessly so. The adage, “It’s not what you earn, it’s what you keep,” certainly applies to the years leading up to your retirement. Fortunately, there are many ways to structure your portfolio to make it more tax-efficient. For example, many exchange-traded funds, and certain mutual funds, strive to minimize their tax footprint. Naturally, it can be a good idea to fund your retirement accounts to the maximum extent in order to shelter your money from taxes. But your financial advisor can help you spot any additional steps you can take to avoid, or at least postpone, the impact of taxes.


Push Social Security Benefits Until Later, if Possible

The longer you wait to take your Social Security benefits, the larger your monthly checks will be. By postponing these benefits until your full retirement age or later, you can increase the amount of money you’ll receive in retirement. There are other strategies you may want to consider when it comes to these benefits. Work with a financial advisor to see how different scenarios will affect your bottom line.


Discuss Selling Real Estate to Accelerate Your Retirement Strategy

Many people have asked me, especially lately, if they could or should sell their homes as they get close to retirement. There are many good reasons for this, starting with the current strong real estate market. By selling your home, you unlock your accumulated equity and can take advantage of appreciated prices. It’s also an opportunity to reduce your expenses by eliminating a mortgage payment or lowering your housing needs by downsizing, not to mention the reduction of taxes.

However, this isn’t the best strategy for everyone. Discuss your options with a financial advisor before making a decision that can have long-lasting effects. Moving can also create new expenses, so, as said before, make sure to respond intelligently instead of reacting to the drama investment loss can bring by blindly following a financial trend you may have heard about.


The Bottom Line

Suffering a financial loss right before retirement age can be scary, frustrating and disheartening. But it doesn’t have to be the end of the world. Start a conversation. Understand your options. Are there alternative investment options for high net worth individuals? How do high net worth individuals invest pre- and post-retirement? Does your current financial advisor practice active investment management strategies? Are you hitting important investment milestones? These are all crucial questions to ask.

The team at Heritage Capital has been helping people retire for more than 30 years, and in that time, we’ve experienced a range of market conditions. We use active investment management and comprehensive financial planning to help our clients control their risks, so they can have a successful retirement, no matter what happens with the markets or the world.

Start a conversation with our team today.

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Paul Schatz, President, Heritage Capital