Is It Time to Lock in Those Stock Market Gains?!

American markets have been enjoying a recent stock market rally, with some markets posting double-digit increases. It is the nature of the markets to rise and fall. So if you are approaching retirement, this might be the time to begin to lock in your stock market gains. If you’re wondering why, think about it. Many Americans will be relying on their portfolio money for retirement income once they leave the workplace. It may be to pay for spending quality time on the green, sailing, horseback riding, getting away on vacation, or whatever their preferred retirement activities may be.

Older Americans tend to have less invested in stocks because they move their savings out of higher risk vehicles in their pre-retirement years. This is typically to protect their retirement nest egg, since they tend to have less time for recovery. Unfortunately, many Americans are still reeling from losses from the 2008 financial crisis. They are looking at a delayed retirement.

You can take steps to protect the financial gains your portfolio has enjoyed and start preserving your wealth for your retirement lifetime. This may call for a shift in financial focus — a start to evaluating safer retirement vehicles which have a lower risk profile than equities, like annuities and life insurance. It is a good idea to review your portfolio at least once a year, to review to make sure that your portfolio is meeting your goals, objectives, and expectations. As you approach retirement, you may want to begin to transfer your portfolio to a more risk-adverse position and realize any financial growth you’ve achieved before the markets make their natural corrections.

Why is Now the Time to Consider a Financial Shift?

If you and your partner are in your fifties, now is an important time. Those of us who are within 5-10 years of retirement, or even the first 5-10 years of our post-work timeline, are in what we call the “retirement red zone.” The decisions we make now will impact the rest of our lives, no matter what. This is a period of change, which tends to be different from the earlier stages of financial life.

For example, as retirement nears, your financial priorities may change. Your basic living expenses may decline as you pay off your mortgage or other debt. You and your partner may be empty nesters, or you may have fewer children living at home. Your target retirement timeline is drawing closer, and now holding onto what you’ve saved up is more important. With the markets at an all-time high, you may want to consider looking at strategies to preserve your hard-earned savings, so you maintain your spending power in retirement and live comfortably.

Why Should I Lock in My Financial Gains?

As mentioned above, you will want to consider a shift to a more risk-adverse portfolio as you approach retirement. This may involve taking your built-up wealth now and transferring them to more conservative options. This helps to maximize your retirement pot, protecting it at the tail-end of your peak earning potential. The stock markets have been performing well for some time. Economic history tells us that the markets are cyclical and that they will drop again before beginning another period of growth.

Many Americans suffered losses due to a drop in the value of equities in during the financial crisis of 2008. In one year, the stock market fell 42%, which resulted in $2 trillion of losses in defined-contribution plans. Recovering from this loss took a long time, and some people still have not replenished their nest eggs. As a result, many Americans are risk-adverse and are taking a more diverse and conservative approach to their retirement money.

These should not be deemed as scare tactics or imply that a downturn is on the horizon. It’s just a possibility. However, as you approach retirement, you should be taking steps to protect your nest egg and start deciding how you will use your nest egg for retirement income.

Closing Thoughts

It is important to remember that if you lock in your stock gains outside of a tax-advantaged account, you will generate taxable income. Furthermore, if you sell stocks within a year of purchasing them, any gains will be taxed at your highest personal tax rate. There are ways to protect yourself, such as holding onto stocks for a least a year or purchasing PUTs or setting a trailing stop order. But those are outside of this discussion, please be sure to work with qualified professionals for tax and financial advice on any such situations.

Whatever you choose to do to lock in your stock gains and to protect your retirement nest egg, it is important to work with a trusted financial professional. If you’re planning to retire at 65, you may be able to enjoy 30 years or even more of retirement. Since you are thinking about retirement and planning now, you are in a better position that most Americans over the age of 50. But you still need to make informed and considered decisions to protect your wealth and ensure you are financially prepared for retirement.

Ready for Personal Guidance?

If you’re ready for personal guidance with your retirement goals, you have access to knowledgeable financial professionals on SafeMoney.com. They can assess your financial picture, listen carefully to your needs, and give you personal help to reach your goals. Reach out today for guidance on how to preserve your accumulated wealth from this two-year market rally and perhaps lock in that growth – before the market drops!

Should you need a personal referral, please call us at 877.476.9723.