My retirement savings have been wiped out. How can I recoup recent investment losses that I had "late in the game?"

Ask a Consultant: I'm 81, have a $118,000 mortgage, and a $110,000 IRA. Should I withdraw from my investment to make mortgage payments? — Ask a Consultant: I’m 81, have a $118,000 mortgage, and a $110,000 IRA. Should I withdraw from my investment to make mortgage payments?

My retirement savings have been wiped out in market changes over the past two years. I plan to work for another five years. What investment suggestions do you have this late in the game?

– Daniel

Sorry to hear that you took a hit when entering the extended home the retirement. I know this can be disappointing and potentially stressful. This type of scenario is why I suggest broad diversification and asset allocation that fits your schedule, aligns with your goals and allows you to stay the course through challenging markets. (If you have additional investment or retirement questions, This tool can help match you with potential advisors.)

Possible Causes of a “Thaw Disposal”

While I don’t know how much I lost, calling it “eliminated” tells me it was a lot. Let’s build some context around that. If the past several years have doomed you, I imagine one of two things may have happened, or perhaps both.

You maintain a focused portfolio.
I tried Market timing.

There are two common pitfalls of investing that expose you to a great deal of unnecessary risk. (If you need help aligning your investments with your risk tolerance, Consider working with a financial advisor.)

Concentrated portfolio contract versus diversified portfolio

Ask an Adviser: How can I make up for my recent investment losses? — Ask an Adviser: How can I offset recent investment losses “late in the game?”

I’m suggesting you’ve probably been keeping a focused portfolio because a widely diversified portfolio isn’t going to kill you.

Let’s use the classics Portfolio 60/40 as an example. This portfolio usually holds 60% of the assets in stocks and 40% in bonds. a The diversified 60/40 portfolio generated an average annual return of 6.5% for the ten-year period ending in 2022, according to bloomberg. This return can vary depending on what exactly you have in your 60/40 portfolio. It will also be different for other allotments such as 50/50 or 70/30. But the basic premise remains true – the past several years have not erased widely diversified portfolios. (a financial consultant It can help you make important investment decisions such as how to allocate your money over stocks, bonds, and cash.)

A diversified portfolio is a good way to mitigate risk. Concentrated investments tend to be more volatile and expose you to specific risks diversification can protect from. When I find properties heavily concentrated in the portfolios of new clients, I always point out that one CEO, one failed product launch, or one hint of bad publicity can “knock you out.”

Does having a diversified portfolio mean you will always get a positive return? no. Some years are good and some are not. For example, a 60/40 portfolio lost about 16% in 2022. As long as you include these volatility in your plan, you will have created a significant risk mitigation factor.

If you are ready to match up with local advisors who can help you achieve your financial goals, then let’s start.

Market timing vs. maintaining the correct asset allocation

It’s nice to think that investors can sell their holdings just before they go down, sit on the sidelines with their money, and then buy back as soon as they expect it to start going up again. In fact, it doesn’t tend to work that way.

Investors often price the market incorrectly. Many people who try this end up selling after Their portfolio drops in value and they wait too late to buy back, missing out on a recovery. This is not because they are not smart. The market is simply unpredictable, and people are emotional, especially when it comes to their money.

Make sure the asset allocation is right for you personally. This means that it aligns with your schedule, goals, and risk tolerance. The amount you set aside for stocks, bonds and cash also depends on how much money you will need to withdraw and when. Proper asset allocation can help you get through those bad years without selling and going into the money. (If you need help allocating your assets, This tool can help you match with financial advisors.)

next steps

I think the best step is to identify and maintain an asset allocation that is right for you. This is not a panacea that will give you huge returns. But it can give you a more consistent return which leaves less to chance, reduces risk and allows you to build an actual plan rather than hoping for exceptional investment returns to bore you.

Tips for finding a financial advisor

Finding a financial advisor doesn’t have to be difficult. Free SmartAsset tool It matches you with up to three vetted financial advisors serving your area, and you can interview your own advisors at no cost to determine which one is right for you. If you are ready to find a counselor who can help you achieve your financial goals, let’s start.
Consider a few advisors before settling on one. It is important to make sure you find someone you trust to manage your money. When you consider your options, These are the questions You should ask a counselor to make sure you are making the right decision.

Brandon Renfro, CFP®, is a SmartAsset financial planning columnist and answers readers’ questions about personal finance and tax topics. Do you have a question you would like answered? Email AskAnAdvisor@smartasset.com and your question may be answered in a future column.

Please note that Brandon is not a participant in the SmartAdvisor Match platform and has been compensated for this article.

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