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A blog about living in and planning for retirement

3 Ways to Regain Control of Your Retirement Savings

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The stock market seems to have gone berserk, the job market is in the toilet and the housing market, well, I won’t even go there. With all this going on, it’s no wonder a new study shows that people feel they don’t have much control over their retirement savings.  But on the upside, there are things you can do to get the upper hand over your nest egg.

Nearly two-thirds of investors say they “have little” or “no control at all” over their effort to grow and maintain their retirement savings, according to a new study by Wells Fargo/Gallup Investor and Retirement Optimism Index.  The top reasons people cite for feeling this way are unemployment, a weak economy, extreme market volatility and the political situation in Washington.  “A majority of Americans feel they don’t have control over their effort to build retirement savings, and this is just as worrisome as the sharp drop in investor optimism,” David Carroll, a senior executive vice president at Wells Fargo Wealth, said in a statement.

While there isn’t much you can do about the economy or the extreme market volatility, there are things you can do to take control of your retirement savings trajectory — in spite of these conditions.  Encore talked to Marcia Tillotson, senior vice president for Wells Fargo Advisors, to get some tips.

Write – and revisit — a long-term plan

It’s important to remember that the economy goes through cycles — and this happens to be one of them.  So, don’t panic, and, say, pull your money from the stock market.  Instead, work with your financial advisor to create a written, long-term plan, says Tillotson.  (The study shows that only 26% of non-retired people have a written plan, and just 36% of retirees do.) “If you have a plan, you feel better about the direction of your retirement,” she says.  You’ll also want to revisit that plan yearly, according to a study by T. Rowe Price, as well as when you have a major life change like the birth of a child or loss of a job.  Click here for more information on creating a financial plan.

Have a cash reserve

One of the best ways to protect your nest egg is to keep a cash reserve on hand, she advises. “You should have a year’s worth of cash on hand,” Tilloston says. “This will prevent you from having to dip into money invested in the market when the market is down.”  It’s also important in the event that you lose your job or have a major unexpected event, she says.

Focus on asset allocation

Proper asset allocation is a key to ensuring that when the market goes down, your savings don’t take a major nosedive along with it.  In fact, one study shows that 91% of a portfolio’s performance is determined by asset allocation.  So, make asset allocation a key part of your long-term financial plan, altering it with your age and risk tolerance.  To determine the right asset allocation for you, click here.

Test savings scenarios with the SmartMoney Retirement Planner.

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About Encore

  • Encore examines the changing nature of retirement, from new rules and guidelines for financial security to the shifting identities and priorities of today’s retirees. The blog also explores news that affects retirement, from the Wall Street Journal Digital Network and around the web. Lead bloggers are reporter Catey Hill and senior editor Jeremy Olshan. Other contributors include The Wall Street Journal’s retirement columnists Glenn Ruffenach and Anne Tergesen; the Director for the Center for Retirement Research at Boston College, Alicia Munnell; and the Director of Research for Pinnacle Advisory Group, Michael Kitces, CFP.

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