Retirement planning during uncertain times: Lessons for each generation

(BPT) – By Kelly Greene, TIAA Sr. Director and co-author of The New York Times bestseller The Wall Street Journal Complete Retirement Guidebook

Don’t touch your face, and don’t touch your stocks — that advice went viral in the past few weeks, and it goes for retirement savings, too.

Like so many of you, I am trying to do everything imaginable right now to support the health of medically fragile family and friends.

But the only thing I haven’t woken up thinking about is whether I should be changing the way I’m saving for retirement. Here’s why: We’ve been on this roller-coaster ride before, and we were just as uncertain those times, too. No one knew what would happen in 2000 when the tech bubble burst, or in 2001 after the September 11 terrorist attacks. How we would emerge from the financial crisis in 2008 was a mystery for at least a few years.

- FWBP Digital Partners -

I had a front-row seat for those economic calamities as a personal finance journalist covering retirement planning. In those earlier times of uncertainty, I interviewed hundreds of people, at all stages of their career and retirement, along with financial advisors. And many of the people who suffered financially were those who reacted emotionally — taking action right away.

Rushing a decision about retirement savings could lead to regrets and cost you more money unwinding a hasty move down the road. Here are some stories from recent times of turmoil that provide lessons for people at different points in their career:

Early Career Lesson: Resist selling low and buying high

I remember a 20-something-year-old friend, who, when the markets were falling in 2000, confided that he’d just liquidated his 401(k) because he couldn’t stand to lose any more money. “I’m out,” he said, throwing up his hands. The real pain came the next year, when he learned he owed hefty tax penalties for that emotional move.

- Advertisement -

Other people who kept their savings in a workplace plan, but sold off sinking equity funds, also lost out. It’s easy to forget to re-invest when markets start to improve, leading to a classic error: They sold low and then bought high.

The problem is, there’s no way to know exactly how long, or when, financial markets will hit bottom and start to bounce back. The lesson here is that it’s best to focus on what we can do and let our investments ride.

Mid to Late Career Lesson: Don’t put all your eggs in one basket

After a decade or two of making regular contributions in your retirement accounts, especially with employer contributions, it’s exciting to see savings add up. In the mid-2000s, a heady time for the markets, many mid-career investors moved savings into equities, dreaming of retiring early.

- Advertisement -

Then real estate lending started showing cracks, leading to 2008’s full-blown financial crisis. Retirement savings tumbled as much as 40% in value. That meant people with $1 million suddenly had $600,000. One retired banking executive I interviewed had invested his life’s savings in financial services stocks, because he felt comfortable investing in what he understood. By early 2009, he was back at work running a bank’s foreclosure unit to make ends meet.

It’s a great illustration of why we shouldn’t put all of our eggs in one basket. Some retirement-plan choices, such as target-date funds, will diversify our investments for us, based on when we plan to retire.

But if you want to choose your own retirement-plan investments, it’s important to keep your asset allocation on track. And if you haven’t thought about it in a few years, or ever, consider asking a financial advisor to help you make sure your current strategy aligns with your goals.

As you get closer to retirement, it’s important to consider additional ways to diversify beyond stocks and bonds. Increasingly, real estate, alternatives, annuities and other types of assets can provide more ways for retirement investors to spread risk.

Nearing Retirement Lesson: Use a three-legged stool

If you are getting ready to retire, should you wait? It depends on how you expect to generate your retirement income and how much cash you’ve set aside.

Retirement planners use models to talk about how to create your income stream. The most classic is the “three-legged stool” of Social Security, investments and a pension (all but extinct) or annuities. There are many variations on “buckets” to hold cash, short-term and long-term investments, with earnings trickling from the longer term holdings to cash.

If your “three-legged stool” includes enough sources of guaranteed lifetime income, or your “buckets” hold enough cash to avoid selling off investments that have lost value, you may be in good shape. If you’re not already working with a financial advisor, it might be worth getting a second opinion.

However, if your investments are still heavily weighted in stocks, you may want to re-evaluate your timing. If you do decide to delay your retirement date by a year or two, consider the approach that some would-be retirees took in 2008: By working a few more years than originally planned, they increased the size of their monthly Social Security checks.

Meanwhile, to reward themselves for staying on the job, they used a small part of their would-be savings to go ahead with a few retirement goals, such as travel or a kitchen renovation.

As you can see, amid so much other uncertainty right now, retirement planning is one part of your life that can be managed — either on your own, or with the help of a financial advisor. No matter where you are on your career path, there are strategies for dealing with market volatility while continuing to save for your financial future.


As with all mutual funds, the principal value of a target date fund isn’t guaranteed at any time, including at the target date, and will fluctuate with market changes. The target date approximates when investors may plan to start making withdrawals. However, you are not required to withdraw the funds at that target date. After the target date has been reached, some of your money may be merged into a fund with a more stable asset allocation.

Target date funds share the risks associated with the types of securities held by each of the underlying funds in which they invest. In addition to the fees and expenses associated with the target date funds, there is exposure to the fees and expenses associated with the underlying mutual funds.

Any guarantees are backed by the claims-paying ability of the issuing company.