How to Maximize Your Retirement Savings Amid a Volatile and Bearish Stock Market

Cropped shot of a senior couple sitting together and going through their finances at home.
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Stock market investors have been getting a double dose of horror ahead of Halloween, with stocks making wild and volatile swings even as they remain in bear territory. Consider the session of Oct. 13, 2022. As Markets Insider reported, the S&P 500 hit a 52-week low in intraday trading, swung more than 5% during the session, and closed up by 2.6%.

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This kind of unpredictability makes saving for retirement especially challenging. It also comes amid a major change in contribution limits for retirement savings plans.

On Oct. 21, the IRS announced that the limit will rise to $22,500 in 2023 from $20,500 in 2022 for 401(k)s, 403(b)s, most 457 plans and the federal government’s Thrift Savings Plan. The limit on annual contributions to an IRA will rise to $6,500 in 2023 from up from $6,000.

Catch-up contribution limits for employees aged 50 and older will also increase, rising to $7,500 in 2023 from $6,500 in 2022.

Retire Comfortably

The combination of a volatile stock market and new rules on contributions means you need to pay special attention to finding the right strategy to maximize your retirement savings.

Your first order of business is to take a deep breath and not panic. The average bear market recovers in three-and-a-half years, according to the AARP. If you are a younger investor, you can invest regularly and still have plenty of time to recover. There is even an opportunity to buy lower-priced stocks and watch them rise in value when the markets move back into bull territory.

Even if you’re 50 years old and plan to retire in 15 years, “your best bet may be to keep socking away money in your 401(k) or IRA in the same proportions as you have been,” financial author John Waggoner wrote in a blog for the AARP.

Sefa Mawuli, a certified financial planner at Pavlov Financial Planning in Arlington, Virginia, has a similar take.

“The key to 401(k) success is consistent and ongoing contributions,” Mawuli told CNN. “Continuing to contribute during down markets allows investors to buy assets at cheaper prices, which may help your account recover faster after a market downturn.”

Retire Comfortably

You might even consider boosting your contributions during a bear market if you haven’t already maxed them out. This gives you the advantage of buying stocks at a discount and taking a positive step even as your retirement account shrinks over the short term.

You should also take a look at your asset allocation and adjust it accordingly. Depending on your age, this could mean temporarily rebalancing your assets in favor of lower-risk vehicles such as bonds or value stocks.

“When the market fluctuates, you may find your portfolio can drift away from your original asset allocation targets and the risk profile that supports your financial goals,” Mark Phelps, a CFA and Director of Manager Research at Ameriprise Financial, wrote in a blog. “By reviewing your portfolio, you may discover that you need to rebalance or you may find that there aren’t any changes needed.”

Meanwhile, the higher contribution limits that kick in next year provide an opportunity to maximize your retirement savings, said Kelly LaVigne, vice president of consumer insights at Allianz Life.

Retire Comfortably

“While the current market downturn may have affected retirement plan balances, the lower current price per share – combined with the larger contribution amounts – could really help those who would need to save more for retirement, either to make up lost ground or to help make up for rising costs and market volatility,” LaVigne told GOBankingRates in an email.  “Those who are 50 and over could also benefit from the increase in catch-up contributions for qualified plans.”

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Finally, keep an eye on the long view rather than the short view. As SmartAsset reported, Fidelity recommends having 10 times your annual salary saved for retirement by age 67. This gives you a retirement savings goal no matter your current age.

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Retire Comfortably

About the Author

Vance Cariaga is a London-based writer, editor and journalist who previously held staff positions at Investor’s Business Daily, The Charlotte Business Journal and The Charlotte Observer. His work also appeared in Charlotte Magazine, Street & Smith’s Sports Business Journal and Business North Carolina magazine. He holds a B.A. in English from Appalachian State University and studied journalism at the University of South Carolina. His reporting earned awards from the North Carolina Press Association, the Green Eyeshade Awards and AlterNet. In addition to journalism, he has worked in banking, accounting and restaurant management. A native of North Carolina who also writes fiction, Vance’s short story, “Saint Christopher,” placed second in the 2019 Writer’s Digest Short Short Story Competition. Two of his short stories appear in With One Eye on the Cows, an anthology published by Ad Hoc Fiction in 2019. His debut novel, Voodoo Hideaway, was published in 2021 by Atmosphere Press.
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