Market Volatility
Creating Stability in Uncertain Times
Market volatility is a normal aspect of investing, yet its effects become increasingly critical as you near or enter retirement. Navigating these fluctuations is essential to help preserve your accumulated assets and support continued growth necessary for a potentially long retirement.
How Market Volatility Affects Retirement Planning
Market fluctuations introduce several significant challenges:
- Sequence of Returns Risk: Market downturns near retirement can negatively impact portfolio values, potentially reducing retirement income despite favorable long-term average returns.
- Emotional Decision-Making: Emotional reactions to market fluctuations often result in poor investment choices, such as panic selling during downturns.
- Income Reliability Concerns: Volatile markets can create uncertainty regarding future retirement income, potentially forcing unwanted lifestyle adjustments.
- Shortened Recovery Time: Limited recovery periods before or during retirement heighten the importance of a balanced and diversified financial plan.
Understanding Historical Market Cycles, May Help Manage Volatility Concerns:
Gaining perspective from historical patterns can ease anxiety around volatility:
- Market Corrections Are Common: Corrections of 10% or more can occur as often as every one to two years; and larger declines happen periodically but less frequently.
- Recovery Follows Declines: While past performance does not guarantee future results, markets have generally rebounded following downturns, though recovery periods vary.
- Missing Recovery Days Is Costly: Historically some of the largest market gains happen shortly after declines. Missing these recovery periods can substantially reduce long-term returns.
Protection Strategies for Uncertain Markets
These strategies may help support greater stability in your retirement plan:
- Establishing an Income Floor Secure guaranteed income sources (such as Social Security, pensions, and annuities) to cover essential expenses, ensuring basic needs are met even during market downturns.
- Bucket Strategy Implementation Structure assets based on time horizon to help manage risk and liquidity:
- Short-term bucket (1-3 years): Liquid, protected assets.
- Medium-term bucket (4-10 years): Moderately conservative investments.
- Long-term bucket (10+ years): Higher growth potential assets.
- Principal Protection Allocation: Allocate a portion of assets to principal-protected solutions, providing security while offering limited growth opportunities.
Annuity Solutions for Market Volatility
Fixed Index Annuities (FIAs) and Multi-Year Guaranteed Annuities (MYGAs) can help manage volatility by offering:
- Principal Protection: Safeguards against market downturns by guaranteeing your initial principal is protected.
- Growth Potential: FIAs offer market-linked growth opportunities without direct market exposure. While returns may be limited by caps, spreads, or participation rates, they provide the opportunity for interest growth.
- Psychological Security: Knowing some assets are protected can help maintain discipline in broader investment decisions.
Case Study: Creating Stability Amid Volatility
Robert and Patricia, both 64, experienced a 22% decline in their portfolio value following a sudden market downturn shortly before their planned retirement. They collaborated with a financial professional to:
- Allocate a portion of their assets into a Fixed Index Annuity offering principal protection and growth potential.
- Adjust their retirement timeline, extending it by six months to rebuild savings.
- Implement a bucket strategy, segmenting assets by time horizon to address short-term liquidity needs, mid-term income and growth needs, and long-term growth objectives.
These steps helped them regain confidence and stability of their overall retirement plan.
Taking Action: Steps for Navigating Market Volatility
If you’re concerned about market volatility, you may want to consider the following strategies:
- Reevaluate your risk exposure relative to your retirement goals and timeline.
- Recognize and manage emotional responses to market fluctuations.
- Identify stable and reliable income sources.
- Explore financial products that may offer a balance between asset protection and growth potential.
- Consult a financial professional to assess whether annuity solutions are suitable for your needs and financial objectives.
As we conclude our Annuity Awareness series, remember that life transitions present challenges and opportunities. With thoughtful planning and appropriate financial tools, you can confidently navigate uncertain markets.
Discover the Oceanview Difference
- Financial Strength: Rated “A” (Excellent) by A.M. Best, showcasing our solid financial foundation, providing you with confidence regarding Oceanview’s commitment to meeting obligations.
- Transparency: Clear and straightforward annuity products tailored to your retirement goals.
- Competitive Flexibility: Attractive rates, multiple durations, and varied crediting strategies.
- Client-Focused Features: Free withdrawals, nursing home, terminal illness waivers, and full beneficiary benefits upon the annuitant’s death demonstrate our commitment to your financial security and peace of mind.
Disclaimers
Guarantees are based on the financial strength of the issuing carrier. The multi-year guarantee annuity product with form number IIC19 OLA SPDA, or variations of such, are issued by Oceanview Life and Annuity Company (d/b/a Oceanview Life and Annuity Insurance Company in California; NAIC# 68446). May not be available in all states. Not available in the state of New York or Vermont. Policy form numbers and provisions may vary. Rates are guaranteed depending on the guarantee period selected at policy issue.
The Single Premium Fixed Indexed Annuity Contract [ICC19 OLA FIA], or variations of such are issued by Oceanview Life and Annuity Company (d/b/a Oceanview Life and Annuity Insurance Company in California). May not be available in all states. Not available in the state of New York or Vermont. Product features, limitations and availability may vary.
HARBOURVIEW ANNUITIES ARE PRODUCTS OF THE INSURANCE INDUSTRY AND NOT GUARANTEED BY ANY BANK NOR INSURED BY THE FDIC OR NCUA/NCUSIF OR ANY OTHER FEDERAL GOVERNMENTAL AGENCY. MAY LOSE VALUE. NO BANK/CREDIT UNION GUARANTEE. NOT A DEPOSIT. MAY ONLY BE OFFERED BY A LICENSED INSURANCE AGENT. GUARANTEES ARE SUBJECT TO THE CLAIM PAYING ABILITY OF THE ISSUING INSURANCE COMPANY.
Annuities are generally designed as long-term retirement solutions and have certain limitations. They are generally not intended to replace emergency funds, serve as income for day-to-day expenses, or support short-term savings goals. Please review the contract for full details.
Annuities issued by Oceanview Life and Annuity Company, 1819 Wazee Street, 2nd Floor, Denver, CO 80202. In California, doing business as Oceanview Life and Annuity Insurance Company www.oceanviewlife.com.
A.M. Best Rating as of December 11, 2024, is subject to change. A (Excellent) rating is third highest of fifteen possible rating classes for financial strength. The outlook assigned to these Credit Ratings is stable.
This material is a general description intended for general public, educational use. Oceanview Life and Annuity Company is not providing investment advice for any individual or in any individual situation, and therefore nothing in this correspondence should be read as such.
Neither Oceanview Life and Annuity Company nor any of its representatives may provide tax or legal advice.
Withdrawals in excess of any Free Partial Withdrawal amounts are subject to a Surrender Charge and Market Value Adjustment (MVA). The MVA may have the effect of increasing or decreasing the Surrender Value of the withdrawal depending on the market interest rate changes.
The IRS may impose a penalty for withdrawals prior to age 59 ½.
Contracts purchased in an IRA or other tax-qualified plan provide no additional tax-deferral benefit, since they are already afforded tax-deferred status. All annuity features, risks, limitations, and costs should be considered prior to purchasing an annuity within a tax-qualified retirement plan. For non-qualified annuities, tax deferral is not available to corporations and certain other entities.
While care was taken in compiling this information, the Company reserves the right to correct any typographical errors that may exist.
Rates, renewal caps, and declared interest rates, will always follow contract provisions relative to minimums and maximums stated. Oceanview determines, at its discretion, the rates, renewal caps and, declared interest rates above the contractual minimums that are guaranteed.
Funds allocated to an index do not directly participate or invest in the stock market or any index.