IRA Retirement Planning Investing in Bear Stock Markets: Why Retaining Stock Portfolio is Important

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IRA & retirement plan investing: Retirees and their Shrinking Nest Egg

Powerpoint slides on a superior retirement planning strategy called Roth IRA on Roids which allows for tax-free distributions, tax-free growth, guaranteed principal and guarateed death benefits.You did all the "right" things – you maintained a diversified portfolio, was in the correct risk profile based on your age, and maxed out all contributions for as long as you can remember and yet you are wondering what is going on! Many people who are saving for retirement have felt the negative effects of the economy. With failing stocks, those investing in IRA and 401k accounts are seeing their savings cut in half. Many people are worrying because they have taken advantage of the simple IRA contribution limit and contributed the maximum amount and have nothing to show for it.

While this is a cause for concern, there are some ways to prevent losing your savings. Even though the market is not doing well, an IRA account is still one of the best ways to plan for retirement. Whether it is a traditional or Roth IRA, these accounts will continue to add savings to your financial plan for the future. An even better option, because it will never lose principle and offers guaranteed returns, is the Roth on Roids.

The stock market is far from steady, which causes great concern for investors. Even though it may be tempting to withdraw your funds, financial investors claim that anyone who is close to retirement should continue investing. As long as individuals comply with simple IRA rules, their contributions should be working for them. One way people are gaining a small sense of security is by reducing current contributions.

James Swanson, from MFS Investment Management in Boston, states that the main problem with withdrawing funds from stocks is that no one will know when to begin investing again. He claims that "By the time the market goes up, you could lock in your losses and miss out on the upswing."

Regardless of current economic difficulties, in the long run empirical evidence shows that stocks remain the best investment. IRA and retirement plan investing continues to be one of the best ways to plan for retirement. People cannot simply rely on cash and bonds. While they are a decent investment, history shows that the odds are they will not beat inflation over a long period of time.

Looking at the history of the stock market, there have been many times when the market was in a downward spiral. If one was to look back, they would realize that there is a slight glimmer of hope. Since 1957, the 15 bear markets lasted ten months and knocked the market down 29.4%. During the same time, the bull markets lasted 30 months and had gains of 112.5%. While it appears painful now, think of it as taking one step back to move 2 steps forward.

Even though the facts and figures are positive, no investor can rely on that and assume there will be the same upswing in the market. That is why it is best to continue investing in the same manner you currently are. If individuals do not yet have a financial advisor, it may be time to seek one out. It is important to have as much knowledge as possible when making decisions regarding retirement savings. IRA accounts remain a great way to save. Usually, the question revolves around which IRA is best. Right now, with the economy failing, any traditional or IRA account is a positive step because odds remain in your favor that things will recover eventually.

When reviewing your current portfolio, now is a great time to sell low yielding stocks, but don't sell them all! Overall, stocks do not cost much when buying. Make sure you have strong stocks in your portfolio. Take the time to learn the returns from each stock you currently own, then compare stocks for sale and determine how to build a stronger portfolio.

Generally, a portfolio being built for retirement should contain a 30% to 60% investment in stocks. This is not set in stone, so if you are nervous about your current investments and the state of the stock market, it is possible to cut back on stock investments. Those who have an IRA will be able to control the amount of contributions that are being invested in certain stocks.

It is important to retain some stocks in your portfolio. While selling them and going to all cash may seem like the safest route right now, investors would then miss the gains when the stock market picks back up. It is not advised to sell off all stocks. Cutting back a little bit may ease worries, but completely eliminating all stocks will not help in retirement planning or savings. No matter how desperate the situation, do not cash out IRA accounts.

Click here to learn what are the safe places of retirement plan investing in a bear market

Rocco Beatrice, CPA, MST (Master of Science in Taxation), MBA (Master of Business Administration), BSBA (Management/Accounting), CWPP (Certified Wealth Preservation Planner), CMMB (Certified Mortgage Broker), CAPP (Certified Asset Protection Planner), Managing Director, Estate Street Partners, LLC. Mr. Beatrice is an asset protection, award-winning trust, estate planning and tax expert.

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