Don’t Give In to Inflation Panic

Dealing with inflation and a bear market as you near retirement.

It’s hard to see your portfolio dip and not panic – especially as you near retirement. Coupled with record inflation, a dip might tempt you to sell your investments to drive cash flow. But long-term thinking even when nearing retirement is the key to preventing portfolio erosion, and to achieving much more.

Avoid this pitfall by taking a holistic approach to your finances and enlisting help from your advisor. Here are some dos and don’ts for dealing with inflation and a bear market as you near retirement.

Do get a clear picture of where you stand. First and foremost, it’s important to tune out the panic-inducing headlines and revisit your personal situation and current position. This is best done with your advisor, who can hear your concerns and offer a level-headed approach and make necessary adjustments if needed.

Don’t bail out at the bottom of a dip. Realize selling everything now would cement a loss and wouldn’t allow you the opportunity to recover when the market picks back up again. While there may be some instances where it makes sense to cut your losses (probably fewer than you think), this should not be a widespread strategy in a downturn.

Do consider using cash from other sources if you’re able. It’s wise to have cash to cover up to 12 months of expenses in retirement, and while this doesn’t always provide enough time for your portfolio to fully bounce back, it provides a cushion and gives you time to determine the best next steps. One strategy involves selling less volatile bonds in order to generate cash, even though it might seem counterintuitive. It will buy time for more active investments to come back.