4 Moves To Consider If Your Retirement Fund Stops Growing — Even If You’ve Already Retired

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Many U.S. retirement savings plans hit the skids in 2022 during one of the worst years for the stock market this century. The S&P 500 sank 19.44% in 2022, according to MacroTrends, while the average balance of Vanguard 401(k) accounts fell 20% from the previous year to $112,600.

Despite this year’s rebound in the stock markets, many of those 401(k) balances have yet to recover — especially for older Americans.

According to Fidelity Investments’ Q2 2023 retirement analysis, the average 401(k) account for baby boomers came in at $220,900 at the end of the 2023 second quarter. That was down from $249,700 at the end of 2021. The average Gen X retirement account was $153,300 at the end of the 2023 — a decline of 8% since the end of 2021.

If your retirement fund is still moving sideways instead of up, it’s time to rethink your financial strategy, regardless of your age. Here are four moves to consider.

Check That Your Portfolio Is Well Diversified

This is something you should be doing anyway, ensuring that your retirement accounts have the right mix of stocks, bonds, cash accounts and other assets. Pouring most or all of your money into one asset class exposes you to losses should those assets tumble.

As The Motley Fool reported, few 401(k)s let you buy individual stocks, which means you will usually be choosing mutual funds and exchange-traded funds (ETFs). When selecting these funds, spread them out so that you’re not too heavily exposed to one type of investment — for example, growth funds, ESG funds or international funds.

Make Your Money Work Better for You

Also, take into account your age and risk tolerance. If you are already retired, you want a bigger proportion of lower-risk investments such as bonds and value funds. If you’re young, you can take on more risk because you have more time to recover from the inevitable ups and downs.

Move Some Money Into CDs

The Federal Reserve’s series of interest-rate hikes over the past couple of years is good news for bank savings accounts — including certificates of deposit. The best CDs right now offer annual percentage yields as high as 5.92%, giving you a guaranteed return on your money. Just make sure to spread your investments out between short- and long-term CDs. Putting too much money into five- or 10-year CDs means you might miss out on better returns when the stock markets head back into bull territory.

“While CDs may feel safe, they are typically not appropriate for long-term investments because they will lose to inflation over time,” Ryan Haiss, certified financial planner at Flynn Zito Capital Management, told MarketWatch. “Investors have a much better chance of being successful with their investments by staying in the market instead of trying to time the market.”

Hire a Financial Advisor

Most people lack the time and expertise to develop a winning long-term retirement savings strategy on their own — which is one reason most Americans don’t have nearly enough saved up in their retirement funds. If you don’t have a long-term plan, MarketWatch recommends hiring a fee-only certified financial planner to help you navigate the best strategies for long-term success. This applies to retirees as well, many of whom will have to make their savings last another 25 to 30 years.

Make Your Money Work Better for You

“There are many factors to consider when making decisions about investments and there are tradeoffs between safety, security and growth,” WorthPointe Wealth Management CFP Anthony Ferreira told MarketWatch. “Having a long-term perspective can sometimes be very beneficial with regard to framing near-term decisions.”

Take Advantage of the ‘Brokerage Window’

If you’re not familiar with brokerage windows, you’re not alone. A blog on the Total Wealth Planning site called it “an often overlooked perk” that is available in many retirement plans and lets you choose from a “large universe” of mutual funds, ETFS, stocks and bonds.

“If utilized appropriately, a portfolio can be structured to not only reduce risk, but also potentially improve investment returns,” the blog said. “The investment options within the brokerage window are typically from any and all mutual fund companies … While the investor should be wary of choosing funds that may be inconsistent with their risk tolerance or investment objectives, if managed appropriately, the performance of these accounts can be maximized.”

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