Pattie Lovett-Reid: Retirees, it's time to replace panic with process

When your financial foundation is rocked, the immediate reaction is to wonder what the heck are we going to do now?Begin by reassessing financially where are you today. It is important to understand very clearly how much money you have coming in and what it is you are spending your money on. Cut out the daily market noise. Your focus is your plan and your retirement goals. This is not time for guesswork. This is the time for razor-sharp precision.

Ensure your portfolio is balanced. Balanced refers to having cash, bonds and stocks in your portfolio. Retirees ideally have a full year’s living expenses in cash so they don’t have to sell any of their investments at exactly the wrong time. In other words, when markets melt down. Bonds are an important staple in your portfolio but stick to high-quality companies. Companies that have little debt and strong balance sheets.

You should have some money invested in the markets. Stocks will offer growth potential and that in turn will help you keep up with inflation, preserve your purchasing power and provide some upside potential. Some in retirement fear buying stocks and prefer to sit in cash. I would argue if you sit in cash after you pay your taxes on any income generated in your account and if inflation creeps up you will actually be losing more money than you thought.

The bottom line: how much money you will need in retirement is driven by what sort of lifestyle you hope to enjoy. Controlling what you can, how much you are spending, and how much risk you have in your retirement portfolio can all be altered to meet the current environment. Recouping losses is going to take time. However, a gentle reminder, you could spend a long time in retirement. So if you have lost money in your portfolio you likely still have time on your side.

Once the panic is replaced with process and fact, as difficult as it may seem, this is your time to spend and not only save. You have earned that right.

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