Managing Your Retirement Through Market Volatility: FAQs & Additional Resources
GuideStone® is committed to providing up-to-date information about questions you might have. Following are the most commonly asked questions we have received.
The volatility and uncertainty of the market is making me very anxious. What counsel can GuideStone provide me?
We understand this is a very challenging time and can create fear and anxiety. Making solely emotionally driven decisions rarely, if ever, results in a positive outcome. Keep the big picture in mind and understand its importance as we are reminded in Scripture to:
Do not be anxious about anything, but in everything by prayer and supplication with thanksgiving let your requests be made known to God. And the peace of God, which surpasses all understanding, will guard your hearts and your minds in Christ Jesus (Phil. 4:6–7, ESV).
When do you think this uncertainty and volatility will all be over?
We cannot be sure of the near- or long-term ripple effects from unexpected events like the coronavirus. There will be an economic impact in the United States and globally, and that impact could likely last through much of 2020.
Since the future is unknown, we will take it one day at a time. We suggest focusing on things you can control rather than those outside of your control, including:
- Reviewing your spending habits
- Evaluating your recurring costs (cable & streaming services, dining out, lawn care, etc.) to find ways to save more
- Paying off debt sooner
- Increasing your retirement savings contributions
Is my retirement account safe?
Investing for the long term brings with it unavoidable ups and downs along the way. However, by investing in mutual funds, investors have the added benefit of investment diversification in a large number of companies that operate in a wide range of industries.
While diversification will not eliminate the possibility of investment loss in times like these, it does limit investors’ financial exposure to the performance of any individual company in which the funds invest.
A multi-manager investment approach can provide an additional level of diversification by providing access to multiple, carefully selected, world-class investment management firms within a single investment fund.
Read more about our manager-of-managers philosophy.
Are my investments with GuideStone FDIC-insured?
GuideStone is not a bank, and therefore your investments in mutual funds are not covered by FDIC insurance. There is no guarantee of increasing or permanent value when you invest in a mutual fund. Mutual funds that invest in stock market-related instruments are not risk-free, and an investment in fund shares is inherently risky by nature. When you invest in mutual funds, you are seeking a potential increase in the value of your investments. In return for the potential growth of your investments, you realize there is a risk that the amount of your investment could decrease by some or all of its value.
Mutual funds have many types of risks, including general market as well as company-specific risk. Mutual funds use diversification to reduce company-specific risk and cannot have more than 25% of their holdings in any one security, while the other 75% must be divided among at least 15 different securities so that none of them represents more than 5% of the total fund. If an individual company or security in the fund is having problems, the impact of that security on a mutual fund would be less significant since it must be a limited percentage of the fund’s total assets.
Since I am nearing retirement, should I just sell out of my investments and stay in a money market fund until things calm down?
Trying to time the market correctly may heighten risk for investors. History has shown us that most investors actually end up with a lower account balance by attempting to time the market than if they had simply stayed the course.
We understand why investors would consider abandoning their long-term strategy due to current circumstances, but attempts to time the market can result in selling low and locking in losses.
Historically, the market has shown that times of market decline have been followed by times of market gains. Some reversals of the decline have occurred over a short number of months, while others have taken as long as two or three years. We believe, in these instances, those who opt to make moves based on short-term circumstances risk the benefits of a well-developed, long-term strategy.
At GuideStone, we think the most prudent approach is having an allocation that matches your overall risk tolerance for the long term. The goal is to manage your risk appropriately both to and through your retirement years.
Should I withdraw or reallocate my funds?
Depending on how your funds are invested — through a 403(b) plan, an Individual Retirement Account (IRA) or an investment account — there may be tax consequences or plan rules that affect the availability of your funds, while moving to a different fund could cause you to lock in any losses you have incurred.
- You usually can withdraw money from a 403(b) plan — such as your employer-sponsored retirement plan — only at termination of employment. If you are below the retirement age set forth in your plan, there can be serious tax consequences that can cost you up to a fourth or more of the assets in the plan.
- While the market is currently volatile, no one can predict with certainty when the market will return to equilibrium.
- The key to weathering any economic storm is to be diversified and focus on your long-term goals. If your long-term goals have not changed, then your strategy most likely has also not changed, but it’s always a good idea to periodically re-evaluate your risk tolerance and overall plan to see if adjustments are needed.
Do I need to reallocate my funds to be safe?
Again, it depends. If you have not reviewed your investment allocations in some time, now is a great time to log into your MyGuideStone® account and utilize the Investment Recommendation tool. It may recommend the same fund you are currently in — especially if you are in a Target Date Fund — if it is the one best suited for your retirement time horizon and risk tolerance.
What fund is most appropriate for me?
Should I put my retirement plan contributions on hold until the current economic conditions subside?
First, market volatility should not deter you from your retirement savings strategy. During certain seasons, you may consider a temporary reduction in retirement contributions due to reasons such as reduced income or a life event. However, periodic market volatility should not solely validate reducing your retirement contributions.
Second, the contrary is actually true! Now is the time to review the amount you are contributing to your retirement account and consider increasing it. GuideStone recommends you make a total contribution of 15% of your salary toward your retirement account, including both individual and employer contributions.
Can I suspend my loan payments, if needed?
To provide the maximum leniency allowed under law, GuideStone adopted the longest grace period for missed loan payments. Anytime a loan payment is missed, we continue to draft. Payments for the prior quarter must be eventually made up or the loan will become a deemed distribution. Once it is a deemed distribution, the remaining balance due becomes a taxable occurrence.
If I move my money to the Money Market Fund or GuideStone Financial Resources Capital Preservation Fund, can I move it back at any time?
Generally, yes. But please carefully consider the long-term implications to your investments before making any fund exchanges as well as any potential excessive trading restrictions. Financial advisors will generally remind clients that they “lock in their losses” when they sell after a market drop. In essence, an investor may inadvertently sell low and buy high in an attempt to follow the market to avoid short-term losses or capitalize on short-term gains, rather than follow a more disciplined, long-term investment approach.
Additionally, excessive trading in and out of a mutual fund over a short period of time may violate market timing rules. There are also restrictions on exchanging into certain funds from the Capital Preservation Fund. If the GuideStone Financial Resources Capital Preservation Fund is available in your retirement plan, please go here to learn more about its exchange limitations.
How is the Capital Preservation Fund invested?
The Fund invests primarily in a diversified portfolio of investment grade fixed income securities. The Fund may also invest to a lesser extent in high-yield securities and money market instruments.
The Fund seeks to maintain, but does not guarantee, a stable price per share of $10, while paying monthly dividends based on a quarterly announced crediting rate.
My advisor is suggesting an annuity product designed to shield my account balance from market volatility. It allows me to benefit when the market is up and promises no possibility of decreasing due to a bear market. Is this a good financial move?
The short answer is that it depends on your unique situation.
The longer answer is that annuity products come in various forms and can be very complicated products to understand. Here are a few key things to consider before making a decision:
- Determine the types of annuity products your financial advisor is recommending (e.g., fixed, index and variable).
- Consider the current low interest rate environment, as you will likely be locking in your money at an historically low interest rate if you choose to purchase a fixed annuity product today.
- Ask your financial advisor to break down the complexities of the annuity product and how it may perform in different market environments.
- Compare the advantages and disadvantages of each product.
- Keep in mind that annuity products typically include surrender fees and/or restricted withdrawal options should you decide you later want to move to another investment vehicle.
- Ask your financial advisor how he or she benefits from your decision to purchase an annuity since these products are typically heavily commissioned.*
*If you purchase a variable annuity, make sure you receive a prospectus.
If you’re looking for further information on annuity products, the Financial Industry Regulatory Authority (FINRA) provides several resources such as:
Additionally, the National Association of Insurance Commissioners (NAIC) provides commentary to help determine if an annuity is your best next step. Visit Tools for Retirement: Is an annuity right for you?
In the past, investors invested in gold in times of market crises and dislocations, but even the price of gold is down sharply this year. What gives?
In decades past, inflation was a much larger and present factor to consider when making financial market investments. Throughout market history, gold was purchased as a hedge against the effects of inflation. In the inflation spike of the late 1970s, when inflation spiked to 13%, gold was used as a safe haven to guard against the harmful effects of inflation. A U.S. dollar held would decrease in value each year by the inflation rate, but the value of gold could remain steady. However, over the past 10 years, inflation has averaged about 2% a year. With the negative effects on the economy this year from the coronavirus crisis, the rate of inflation could be even lower. In an investing environment with little-to-no inflation, there is no reason to buy gold as an inflation hedge. So, if cash is now as good of an inflation hedge as gold, the only difference between the two is in their respective liquidity. Cash is the ultimate liquid investment, freely tradable at any time. Gold, however, is much less liquid, as it is much more difficult to trade, either in physical form or in a gold ETF. Therefore, cash is a much more attractive investment than gold in these times of minimal inflation.
If you have further questions, call us at 1-888-98-GUIDE (1-888-984-8433). Our customer solutions specialists are available to assist you Monday through Friday, 7 a.m. to 6 p.m. CT.