Smart retirement moves to make in your 40s and 50s

Decoding Retirement: Expert Advice for Navigating Market Volatility

If you’re in your 40s or 50s and feeling anxious about the fluctuations in the stock and bond markets, Chris Littlefield, the president of retirement and income solutions at Principal Financial Group, has some valuable insights to share. In a recent episode of Decoding Retirement, Littlefield emphasized the importance of sticking to your financial plan and not succumbing to knee-jerk reactions based on market conditions.

According to Littlefield, individuals with a solid financial plan should trust in its guidance and resist the urge to make hasty decisions in response to market volatility. For those who don’t have a plan in place, seeking professional advice is highly recommended. Littlefield stressed the value of holistic advice tailored to address the specific needs individuals will have in retirement.

“It’s crucial for individuals to work with a financial advisor or consult with their employer’s retirement plan service provider to ensure they are on the right track,” Littlefield advised. He also cautioned against one of the most common mistakes investors make during volatile market periods – trying to time the market.

Attempting to adjust asset allocations in response to short-term market fluctuations can lead to missed opportunities for significant returns. Littlefield emphasized the importance of maintaining a long-term perspective and not letting short-term news sway investment decisions.

In addition to staying the course, Littlefield recommended maximizing opportunities to save on a tax-free basis, particularly for those over 50 who are eligible for catch-up contributions. With the standard annual employee contribution limit for 401(k) plans set at $23,500 in 2025, individuals over 50 can contribute up to $31,000 for the year.

Littlefield also highlighted the significance of having an investment policy statement to guide investment strategies. While some individuals may feel equipped to manage their investments independently, seeking professional guidance can provide valuable insights and tailored recommendations.

One option Littlefield suggested is utilizing target-date funds, which offer professional asset allocation and automatic rebalancing over time. For individuals approaching retirement, transitioning to a managed account may offer a more personalized approach based on individual circumstances.

While managed accounts come with a cost, the benefits of professional guidance and tailored advice can outweigh the fees associated with these services. Littlefield noted that the average expense ratio for target-date funds has been decreasing, making them a more cost-effective option for retirement savings.

In conclusion, Littlefield emphasized the importance of taking a balanced approach to financial wellness and not becoming fixated on a single financial goal. Saving for retirement in a 401(k) is crucial, as tax-deferred savings can provide significant advantages in the long run.

As you navigate the complexities of retirement planning, seeking professional advice and staying informed about market trends can help you make informed decisions and secure your financial future. Tune in to Decoding Retirement for expert insights and guidance on planning for a secure and fulfilling retirement.