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Key Insights for Retirement Planning: Advice from CAPTRUST Chief Investment Officer

By Nanci Hellmich

When it comes to planning for retirement, it’s critical to save regularly and stay invested over time. But the starting point is to empower yourself with knowledge about the value of saving, the financial markets, and your own unique situation, says Eric Freedman, chief investment officer for CAPTRUST. 

“This empowerment can help you navigate market volatility and help you adjust to your evolving lifestyle needs as you age,” he says.

Freedman has been in the financial services industry for almost two decades. Here are some of his best insights.

The biggest financial retirement mistake people make. They become too short-term focused. They let the news impact their decisions, he says. They may sell their investments during a dip in the stock market; that leads to bad outcomes for many people. Then, after that, they may stop saving and investing in their retirement plans.

Consistently timing the ups and downs of the financial markets is impossible for professional investors, let alone individual investors. Staying invested in a mix of investments that is appropriate for your unique situation is a better alternative, Freedman says.

Diversification in investments. Stocks and bonds, in combination, can be powerful tools to grow account balances over time. You should stay diversified throughout your life. Don’t put all of your eggs in one basket, he says.

Stock market volatility. Stocks, over long periods of time, have rewarded patient investors. Certainly, stocks can be volatile, and they can perform poorly from time to time, but in the long run they have paid off, Freedman says.  

Chances are that in 10 to 20 years the stock market will be higher than it is now. You invest to beat inflation, defined as the tendency of prices for goods and services to go up over time. If you’re not trying to keep up with or beat inflation, then the value of your money is going to go down over time, he says.

You have to be aware of the fact that the markets go through cycles. They go up and down.

People tend to get very confident when markets are up a lot, and they get pessimistic when markets are down. Falling markets can cause feelings of anxiety, which may prompt people to sell when they really should hold tight. These are natural behavioral responses, he says.

But the most important thing when saving for retirement is to systematically keep adding to retirement accounts during both up and down markets. That will really help to smooth out your overall investment experience and returns, Freedman says.

Understanding your risk tolerance. Risk tolerance, your personal comfort level with movement up and down in the value of your investment portfolio, is very personal. The most important thing to consider is your time horizon—that is, when you’ll need the money for retirement and how long you’ll need it to last once you start withdrawing, he says.

It’s impossible to predict how long you’ll live or what circumstances life will throw at you. But someone who retires at age 60 might reasonably live to age 90, so you shouldn’t be too conservative with your investments early in retirement. Even in retirement, your money needs to grow so that it can continue to fund your lifestyle, Freedman says. 

To assess your risk tolerance, you need to come up with a reasonable financial plan for retirement, not only how you’ll invest the money, but also how you plan to spend it, he says.

Practical financial wisdom. Understand the power of compounding over time. A dollar saved leads to the opportunity for more dollars in the future. Being able to compound additional dollars over time is the most powerful thing in finance, Freedman says.

Smart ways to save for retirement. Come up with a plan to save, and stick with it. Make regular paycheck contributions to a retirement plan. Take advantage of your company’s match if your plan offers one. That’s free money, he says.

Good investment returns are important, but if you don’t have enough money saved in the first place, even a great investment environment is not going to help you retire.

Make it a lifelong resolution to save money for retirement, he says. Every bit of savings now helps. That may mean you need to cut back on dining out or vacations. If you don’t make sacrifices now to save for retirement, you’ll have to make bigger sacrifices down the road. Or you may have to delay retiring or live less comfortably during your golden years.

There may be times as your life changes that you may be able to save more or not as much, but committing to saving throughout your life can provide meaningful benefits, he says.

Have questions? Need help? Call the CAPTRUST Advice Desk at 800.967.9948, or schedule an appointment with a retirement counselor today.