Listen and subscribe to decode retirement Apple Podcast,,,,, Spotifyor find your favorite podcast anywhere.
If you're in your 40s or 50s and are worried about all the ups and downs in the stock and bond markets, Chris Littlefield, president of retirement and income solutions at Chief Financial Group, has some advice for you.
"I think that because of uncertainty, market volatility, I think people with financial plans should stick to their financial plans and not overreact at any given time," Littlefield said in a recent episode of Decoded Retirement.
This embedded content is not available in your region.
If you don't have a plan, get one. The best scenario, he said, is that you should get professional advice because everyone will benefit from some “overall advice” to meet their needs in terms of retirement.
“They should work with someone,” he added. “They can talk to employers and retirement plan service providers, or they can talk to consultants.”
Read more: Retirement Plan: A Step-by-Step Guide
Regardless, especially during times of market volatility, Litfield warned retired savers to avoid one of the biggest mistakes investors make.
“I think one of the biggest mistakes I see people make is that they try to make the market time,” he said.
For example, investors often try to adjust their asset allocations (a mixture of stocks, bonds and cash) to deal with short-term market volatility.
The problem with this approach is that it requires two key decisions, Litfield explained.
“It’s one thing, but you also have to figure out when to buy, … If you’re not on the market for the first few days after the market rebound, you’re missing out on a big portion of the returns.”
His advice: "If you have a good asset allocation, you have a good plan, please continue with the course. Don't let short-term news affect the long-term horizon."
Littlefield also recommends maximizing all opportunities for tax exemption and making a catch-up donation if you can afford it.
"When you reach the limits that are over 50 years old than the 401(k) plan offers, you still have a great chance," he said.
The standard annual employee contribution limit for the 2025 401(k) program is $23,500. For participants aged 50 and over, the standard catch-up contribution limit for 2025 is $7,500.
This means that individuals over 50 can contribute $31,000 to the annual 401(k) program. Beginning in 2025, individuals aged 60, 61, 62 or 63 are eligible for higher catch-up contribution restrictions in the Security 2.0 Act.
Read more: 50 How much should I save?
According to Littlefield, it is best for individuals to have an investment policy statement to guide their investment strategies, but few people are able to really do it themselves.
This is where professional guidance can help. One option is to find a escrow account, which is “you have an arrangement that suggests asset allocation and helps you rebalance.”
However, professional guidance is also often built into products like target date funds. He said the funds provide professional asset allocation, automatic rebalancing over time and exposure to various asset classes.
Littlefield recommends using a target date fund when you are young and then moving to a escrow account after retirement may be a reasonable strategy. It's a more "personalized" approach, he said, "and it takes into account your personal situation, not just your age."
That is, “the cost of providing that advice,” he said of the hosting account.
Target date funds usually have a fee ratio, which is the annual fee expressed as a percentage of your total investment in the fund. This fee covers the cost of managing the underlying investment and the rebalancing of the portfolio over time.
It is worth noting that the average expense ratio of target date funds has been declining. Morningstar data in 2023 shows that the average asset weighted fee is only 0.30%. However, the fees range from as low as 0.08% to more than 1%.
The usual fees for escrow accounts are different from the investment management expenses of the underlying funds. The fees for hosting accounts can vary widely, but usually range from 0.25% to 0.75% of the total balance per year. Some sources say the common range is 0.35% to 0.50%, while others point to the expenses as high as 0.80%.
Littlefield admits that many of them in their 40s and 50s have competitive demands on their money, such as repaying debt, savings paid for home or child education savings, and saving for retirement.
But, he said, “It’s very important for people to take a balanced approach to their financial health, rather than focusing on any one specific goal.”
Litterfield also suggests that one mistake you should avoid is not saving retirement in 401(k). He said the ability to save on a tax basis is very valuable.
Littlefield is important to note that a large percentage of workers (nearly 50% of the industry as a whole) are not involved in their retirement plans at all, which is a major issue.
Every Tuesday, retired expert and financial educator Robert Powell provides you with tools to plan for the future Decode Retirement. You can do it in our Video Center Or watch yours Preferred streaming services.
