As Gen Xers look forward to retirement in a few years, making smart choices with their finances is critical. Working with a CERTIFIED FINANCIAL PLANNER™ Professional to help create a comprehensive financial plan can offer peace of mind and set a course toward reaching your retirement dreams. 

This is especially true during times of high inflation and high volatility. And the financial markets in 2022 have been very volatile. The U.S. stock market averages entered a bear market during the year, down more than 20 percent. The bond markets have been affected by the steep rise in interest rates that the year has witnessed, as climbing interest rates generally cause bond prices to drop. 

Inflation is typically considered a problem, but with a comprehensive financial plan crafted with the help of a Tennessee financial advisor, you can take the proper actions to ensure your retirement savings will conquer all conditions.

The volatility in markets may be disturbing to all age groups, but Generation X may be particularly concerned. The oldest Gen X’ers may be entering early retirement or looking at retirement about a decade off, a period many financial advisors call “pre-retirement.” A plunging stock market or an uncertain bond market may raise fears that their retirement savings are going to be eroded.

Fears about retirement planning for Gen X are only one of the fears volatile markets can engender. As a Gen X’er, you may be caring for elderly parents and worried about the cost of your child’s college education at the same time. Gen X is the sandwich generation. 

Will you have enough funds for both? What about your long-term goals of choice, such as a second home or travel?

Plus, the economy itself looks increasingly rocky. Inflation is moving at a rate above 8 percent, a level not seen in four decades. Rising interest rates make money more expensive to borrow, which can curtail both consumer and business spending and lead to a recession.

But we want to suggest a comforting thought for Generation X. There are ways to take advantage of a volatile market. In fact, one of the chief benefits of working with a financial advisor in Greeneville, TN, such as Sapiat Asset Management, is that they can point out how you can position yourself to take advantage of a volatile market as well as minimize risks. So here are some suggestions on how to do that.

1.  Revisit your financial plans

The best financial planning starts with a lot of information about you. Your short-term goals, your long-term goals, your plans for retirement (both timing and savings), educational plans for your children, and more will be gathered and reviewed by your financial advisor.

In times of volatility, it’s prudent to revisit these plans to make sure you’re still on track. Your financial advisor can make it clear that you’re still on track long term. If you’re planning to retire soon and market volatility has eroded your nest egg more than you feel comfortable with, you can review your plans to see if it might be advisable to work a bit longer given stock market volatility.

2.  Diversify your portfolio

All investment and retirement portfolios should be diversified. Simply put, no asset class (stocks, bonds, cash instruments) gains all the time. Each asset class has a risk-reward profile. Diversification allows you to minimize risk and maximize reward.

Stocks are usually in a portfolio to maximize returns. Why? Because the broad-based U.S. market averages such as the S&P 500 have appreciated 15 percent on average annually for the last decade, and that includes periodic bear markets during the period. So far, the stock market has rebounded, and often rebounded handsomely, after every bear market.

Gen X’ers may be in a position to remember one of the examples of this phenomenon in recent history. During the Great Recession of 2008-2009, the economy did poorly and the stock market followed suit. But down markets related to the Great Recession were followed by years of strong returns. If investors pulled their money out of the stock market at that time, they didn’t reap those returns – and if they avoided the stock market out of fear, they didn’t realize the stock appreciation that followed.

Bonds are usually in a portfolio to minimize the risk in stock market downturns and to reward investors with steady yields. While bond prices fluctuate in tandem with interest rates, the fluctuations are not as great as the potential in stocks. A financial advisor can also help you realize the gains of the cycle, too. When interest rates start moving down again, as they eventually will, bond prices are likely to rise.

Cash instruments such as certificates of deposit (CDs) are also usually in a portfolio for the stability of principal, as cash doesn’t fluctuate at all.

Given that we’re in a period of market volatility, the appeal of stable investments like bonds and cash may be obvious. However, both asset classes also have a downside. The risk with bonds and cash is relatively low annual returns that don’t outpace inflation. 

Since the Great Recession, interest rates on both assets have been at historically low rates, like 1 to 2 percent. That doesn’t keep ahead of traditional inflation rates, which are roughly 3+ percent per year on average – and it certainly doesn’t keep ahead of current inflation rates. Stocks thus counterbalance the risk of anemic yields.

Portfolios should be diversified within asset classes as well as among them. Your financial advisor in Greeneville can advise you on the best stocks, bonds, cash instruments, as well as digital assets to purchase for your portfolio.

3. Hunt for stocks with good value

One of the clear plus sides of stock market volatility is that stocks may end up better values than they were at the beginning of a slide, and some are excellent bargains. If a company has good earnings and good prospects and is now 20 percent-plus cheaper than it was at the beginning of the year, now might be a good time to buy.

Purchasing new stocks with good potential value means that you may realize gains when the markets turn up again.

4. Rebalance your portfolios periodically

Financial advisors will always recommend that you rebalance your portfolios periodically. Rebalancing is the method of making sure that your asset allocations remain optimal. A period of underperformance or overperformance can throw carefully arrived-at asset allocations out of whack. Rebalancing ensures that they serve your goals.

Contact a Financial Advisor in Greeneville, TN

Gen X’ers are in their peak earnings years and well-positioned to benefit from the current period of market volatility with the help of a financial advisor in Greeneville, TN. Contact Sapiat Asset Management today to discuss your goals and short- and long-range plans.

Sapiat Asset Management is a Fee-Only, Independent, Registered Investment Advisor (RIA), specializing in goal-oriented financial planning and investment management for Gen X Individuals & Families, their Businesses, & the Trusts that benefit them.