5 Proven Methods To Protect Your Retirement Savings Against Stock Market Crashes

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Your golden years should be a period of rest and leisure. Hopefully, you’ve worked hard for decades, saved and invested enough money to call it quits at work, and you can now live comfortably for the rest of your life.

While the stock market is historically one of the most reliable methods for building long-term wealth, it can also result in significant volatility at times, including market swings and crashes.

If you have most (or all) of your retirement savings tied up in the stock market and you’re concerned about stock market crashes, don’t fret. There are several ways you can save your retirement funds from volatile stock market swings.

5 Ways To Save Your Retirement Fund From Volatile Stock Market Swings

Here are five proven ways to fortify your retirement funds against stock market crashes, according to The New York Times and SmartAsset:

1. Delay Social Security

Waiting to claim your Social Security benefit as long as possible is one of the best ways to hedge against stock market swings. The longer you wait to collect Social Security, the higher your monthly benefit will be for the rest of your life. If your benefit payment is larger, you may not have to be as concerned with stock market crashes, since you’ll already have a consistent monthly income.

2. Rebalance Your Portfolio

It’s important to rebalance your portfolio along the way, especially as you approach retirement age. If your investments skewed more towards higher-risk stocks when you were younger, shifting toward a healthy mix of high and low-risk investments as you continue to get older is generally a smart move.

Striking the right balance in your portfolio is a key factor in preventing significant financial losses associated with market volatility.

3. Continually Diversify Your Assets

It’s never a good idea to put all your eggs in one basket. Diversification is key when it comes to investing. Consider buying stocks, bonds, ETFs, and mutual funds of varying levels of risk across many different industries: oil and gas, technology, telecommunication, etc.

This way, you’re much less likely to lose all your money if one or two companies you’re investing in end up failing or if one particular industry faces some serious losses.

4. Don’t Make Panic Withdrawals

Stock market crashes and swings are inevitable: wars, pandemics, economic forecasts, and more can all impact stock market trends over time. If you experience a market crash and lose a significant percentage of your portfolio, stop yourself before selling off assets and making a huge cash withdrawal.

The stock market ebbs and flows but eventually it’ll go back up again. Having a certain level of restraint and some patience is necessary in times of stock market volatility.

5. Consider Downside Protections

Downside protection involves evaluating your personal risk and adjusting your portfolio’s market exposure to limit the impact of potential losses from market volatility. One example of this is downsizing your home to save money — or eliminating monthly expenses that you can do without — in order to provide more cash flow in retirement.

As a rule of thumb, it’s advisable to keep one to two years of portfolio withdrawals in accessible cash positions to avoid selling long-term investments at a less-than-ideal time such as during a market crash.

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