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Help clients understand market fluctuations

After years of a bull market, many clients, especially younger ones, may be caught off guard by a sudden dip. Domestic and global events or politics can affect the markets, for example, but no one truly knows their full impact until after the fact. There are steps you can take to help ease client anxiety about market fluctuations:

Help clients keep their emotions in check.

This can help prevent them from making hasty decisions and instill confidence to ride out market swings. 

Create a sound retirement plan.

A solid strategy can help empower clients to reach their goals no matter how the market fluctuates. This essential step can help minimize the long-term impact of market downturns.

Bull and bears: explain market performance

Emotions like overreacting to the ups and downs of the stock market can play an outsized role in financial decision-making, which can lead to emotional roadblocks in retirement planning. The impulse to seek safety when there鈥檚 a significant market drop is natural. Clients who put their feelings first in response to volatile markets could risk making impulsive decisions they regret later, like rebalancing their portfolio or cashing out. 

Market dips are normal and don鈥檛 always mean a recession is looming. It鈥檚 important clients understand that on average, a is a sustained loss of 20 percent or more 鈥� typically lasting two months or longer. A occurs when stock prices rise by 20 percent, usually after a drop of 20 percent and before a second 20 percent decline. Predicting how long bear market conditions will last is difficult, but clients can take solace that historically stocks have generally risen over the long term. Clients that have a sound long-term strategy in place shouldn鈥檛 panic during periods of market turbulence. Here are three ideas to help clients stay calm when the markets aren鈥檛:

Explain that a market fluctuation is just that, a fluctuation.

While there can be dips, there are also upswings often following broader economic trends. Pulling money out of retirement savings or rebalancing a portfolio could mean losing out on potential gains following the downturn.

Understand what鈥檚 driving a client鈥檚 decision to make adjustments.

These questions could give you a starting point. 

Help clients recognize their emotions.

It鈥檚 important to acknowledge feelings without being ruled by them.

Create a flexible strategy

A diversified portfolio can help clients stay on track to meet their future goals. Targeting allocations to long-term objectives that match a person鈥檚 time horizon and risk tolerance can help reduce the chance of market-related losses derailing a client鈥檚 strategy. Diversification can help strengthen a client鈥檚 portfolio by seeking more consistent returns in volatile markets, managing risk and yielding new opportunities for growth. As retirement approaches or financial goals change, you can adjust accordingly. 

Include guaranteed income

Including guaranteed income solutions can help ensure a client will have a steady paycheck in retirement no matter how long those years last. A fixed indexed annuity (FIA), for example, can offer guaranteed lifetime income. It can also provide opportunities for growth without risking its accumulated value due to market decreases. If the market declines, that money is protected against market loss. 

The following FIA benefits could help create a safety net some clients may need in retirement:

• Income 鈥� retirement savings turned into a guaranteed 鈥減aycheck鈥� can help close income gaps left by Social Security, traditional pensions and retirement plans
• Growth 鈥� potential to accumulate more money for retirement to help cover higher costs, like health care, in the future
• Protection 鈥� accumulated value is preserved in declining markets

Incorporating a fixed indexed annuity into financial portfolios could help secure your clients鈥� financial peace of mind.

Focus on the long-term

While no one has control over the stock market, we can control how we prepare for the future. You can help your clients understand market cycles and the value of a carefully planned retirement strategy to help navigate market fluctuations with more confidence. Reminding clients to stay focused on long-term financial wellness can help safeguard their future for a remarkable retirement.

Insights on 麻豆传媒 Connect. Tips, tools and resources to grow your business by helping clients retire with confidence.

Any information regarding taxation contained herein is based on our understanding of current tax law, which is subject to change and differing interpretations. This information should not be relied on as tax, legal or financial advice and cannot be used by any taxpayer for the purposes of avoiding penalties under the Internal Revenue Code. We recommend that taxpayers consult with their professional tax and legal advisors for applicability to their personal circumstances.