(InvestigateTV) — Gallup reported that 62% of Americans are invested in the stock market, many through their 401(k) or IRA retirement accounts.
Retirement accounts are generally long-term investments, meaning people have time to watch their money grow and ride out market volatility.
Michael Joyce with CW Advisors said that’s exactly why investors shouldn’t panic when they see the stock market fluctuate.
He said that how close someone is to retirement should influence their approach to risk.
“I think it’s important to look what’s inside of the various investment choices in your 401(k) plan,” he noted. “You know, there’s bond funds which are going to be a little bit more secure because they have a maturity date. And they’re going to be a lot less volatile than stock funds. But over the long term, the stock funds are going to make money, make more money.”
Joyce added that most 401(k) plans offer tools to help manage risk—often through target date funds or risk-based options—allowing investors to choose how aggressive they want to be, based on their timeline.
“Your time horizon is definitely shorter when you’re closer to retirement,” Joyce explained. “But you have to remember that it’s not like you’re going to need all your money the day you retire. You might live for 30 years beyond that or longer. And you have to factor that into your investment time horizon as well.”
He said while market swings can feel overwhelming in the short term, hey tend to smooth out over decades.
And the longer your money sits in the account, even after retirement, the more it continues to grow.
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