Courtesy Landmark Bank
ity to withstand the possibility of loss. If you’re invested in
a way that doesn’t let you sleep at night, consider reducing the amount of risk in your portfolio. Many people think
they’re comfortable with risk, only to discover when the
market takes a turn for the worse that they’re actually a lot
less risk-tolerant than they thought. Often that means they
wind up selling in a panic when prices are lowest. Try to
be honest about how you might react to a market downturn,
and plan accordingly.
Also remember that there are many ways to manage risk.
Creating a diversified portfolio will help you reduce your investment risk and have something working for you no matter what the markets are like in the future. Having money
deducted from your paycheck and put into your retirement
plan helps spread your risk over time. By investing regularly, you reduce the chance of investing a large sum just
before the market takes a downturn.
Integrate retirement planning
with your other financial goals
Make sure you have an emergency fund so you don’t need
to dip into your retirement savings early. Generally, if you
withdraw money from your retirement plan before you turn
59½, you’ll owe not only the amount of federal and state
income tax on that money, but a 10% federal tax penalty
and possibly a state penalty, as well. There are exceptions
to the penalty for premature distributions from a 401(k), but
a separate emergency fund can help you weather shortterm financial emergencies without scaling back your retirement investment.
If you have outstanding debt, you’ll need to weigh the benefits of saving for retirement against those of paying off
that debt as soon as possible. If the interest rate you’re
paying on your debt i ́