Global stock markets dropped sharply this week amid rising fears that the US could be heading toward a recession. This downturn has left many people worried about what it means for their pensions, as many pension funds invest heavily in stocks.
However, people are urged “not to panic”, as what happens in the market this week may not significantly impact the overall result of their retirement savings.
Yiannis Zourmpanos, consumer trends analyst, financial consultant, and senior contributor at Bountii, said: “Seeing the stock market go down can be really scary, especially when you think about your pension.
“Recently, the stock market dropped because people are worried about a possible recession in the US. This happened because of bad news about jobs and fears about inflation and interest rates. But what does this mean for your pension, and what can you do to protect it?”
When the stock market falls, Mr Zourmpanos said: “It’s easy to feel scared. But it’s important to stay calm.
“Even though a market downturn can lower the value of your pension, it doesn’t mean your retirement plans are ruined. The stock market goes up and down, but over time, it usually recovers.”
He noted that those who are still years away from retirement don’t need to worry too much, as markets have cycles, and what goes down will eventually go back up.
However, Mr Zourmpanos said: “Keeping a mix of different types of investments, called diversification, can help protect your money. This way, if one investment does poorly, others might do well and balance things out.”
How to protect your pension
Mr Zourmpanos said: “First, don’t panic and sell your investments just because the market is down. Selling during a downturn locks in losses and can hurt your long-term savings.”
Instead, one “good strategy” is to rebalance your portfolio. Mr Zourmpanos explained: “This means adjusting your investments back to your original plan.
“If some investments have lost a lot of value, it might be a good time to buy more of them at a lower price. But remember, always talk to a financial advisor before making big changes.”
Mr Zourmpanos shared an example of a client concerned about their retirement savings. Rather than selling off all assets, they evaluated and diversified the investments, ensuring a balanced portfolio.
The consultant said this strategy helped the client weather difficult periods and take advantage of market recovery.
Mr Zourmpanos continued: “If you are retired or about to retire, focus on investments that give you a steady income, like dividends or interest.
“Avoid selling your investments at a loss to cover expenses. Instead, use cash reserves or other income sources while you wait for the market to recover.”
However, Mr Zourmpanos urged: “Even though the stock market can be unpredictable, it’s important to stay calm and think long-term. Don’t make quick decisions based on fear.”
