How Safe Are Your Retirement Savings if the Stock Market Takes a Tumble?

What goes up must come down is a cliché that’s been around forever. In the investing world, this saying is often used as words of warning regarding the stock market. When it falls, eventually it rises. When it rises, eventually…it falls. And, even if it doesn’t completely crash, you need to have a good idea about how safe your retirement savings are if the stock market takes a tumble.

If you weren’t one of the fearful who dumped all your stocks because of the predicted dive they would take if Trump were elected—you’ve probably been called lucky. And, you probably feel pretty darn lucky, too. Especially if you’re portfolio is invested in the equities and stocks that have pushed the Dow to hit historically record highs.

If your retirement plan holds stock, you should be prepared to take a few hits every now and then. Most retirement plans housed with mainstream custodians are invested in traditional assets such as stocks, bonds, and mutual funds. Chances are you never think about how safe your retirement savings are until trouble is brewing. Your broker takes care of that—or so you hope.

If the market crashes and you’re young enough, over time your account may recoup the loss. If you’re closer to retirement age and this happens, you’re in danger of losing a considerable chunk of savings, running the risk of not being able to comfortably retire.

Diversity in Your Retirement Portfolio Is Your Safety Net

The absence of diversity in retirement portfolios fuels the fire of a Wall Street crash. If you are totally invested in stocks, then you’re totally dependent on them. Which is fine when the market is doing well, but can have catastrophic consequences when the market tanks. But, you don’t have to be a victim of Wall Street lows if your assets are properly positioned to offset the losses of each other.

That is the key to diversification—to invest in alternative options that react differently in the same conditions. So, if one asset class drops, the other asset/s increase in value or at least hold steady so the entire portfolio doesn’t go up in smoke. This creates a balance that can protect your hard-earned savings and help ensure you maintain enough funds to retire one day.

It is hard to create sufficient diversity when the choices are so few if your plan is housed with a traditional investment firm. However, you do have options. Investments in rental property have the potential to balance out a loss in stock revenue in your portfolio. Gold can provide a solid hedge against a myriad of market upsets, just as private equity investments aren’t necessarily affected by a dive of the Dow.

Self-directed retirement plan administrators, like Advanta IRA, allow you to invest in many other assets to grow tax-sheltered income. The assets permissible in self-directed IRAs are in a class known as alternative investments and include residential and commercial real estate, private mortgages and notes, futures, forex, precious metals, and so much more. And, while no investment is guaranteed to succeed—these alternatives present the potential for you to achieve diversity that can protect your savings should the stock market let you down.

If you have questions about this article and want to learn more about alternative investments in your self-directed IRA, call us at (800) 425-0653 or send us a message.

About Jack Callahan

Jack proudly earned his bachelor’s degree in finance and multinational business from Florida State University and his law degree from the University of Florida College of Law. He established Advanta IRA in 2003 and has steadily nurtured and grown the company and the team every year since. Prior to founding Advanta IRA, Jack delivered specialized counsel to real estate investors, small business owners, and real estate professionals on tax, legal and financial matters. As an industry expert, Jack is a frequent speaker on self-directed retirement plans. He is an accredited continuing education instructor for the Florida and Georgia Bar Associations, Florida and Georgia Real Estate Commissions, and The American Institute of Certified Public Accountants.