FORT KNOX, Ky. – The United States has experienced multiple economic downturns over the last century, and one financial expert is sharing valuable insight to consider when watching investments fluctuate.
Army Community Services financial specialist Dwan Payne said her father first introduced her to investing when she was just 19 years old. Now, as she approaches retirement, she said one of the most important lessons she’s learned is not to panic when the market is down.
“Where we are at right now is temporary,” said Payne. “Everything is going to transition because we go through economic cycles.”
When counseling military Families on financial planning, Payne said she reassures them they’ll often see their investments go up and down over the years. As the nation’s current economic state takes another downturn, she cautioned those with retirement accounts like IRAs or Thrift Savings Plans to be prepared.
“The main thing is that we haven’t seen the end of this,” say Payne. “Because inflation is going up, [officials] have to increase the interest rates to balance it and keep us from going into a recession or depression.”
According to Payne, it’s important to not overreact when TSPs lose money. She warned against making drastic changes and moving funds if it isn’t absolutely necessary.
“Don’t jump ship and put it all in [the G Fund],” said Payne. “Just leave it.”
Payne explained there are six different funds those with a TSP can invest money in, each with a different level of risk. The G Fund has the lowest risk, functioning more like a savings account. However, Payne pointed out that while the risk may be low, the reward is, too.
“I certainly don’t want everybody to lose their TSP as a result of getting close to retirement,” said Payne, “but if the stock market does well, they’re going to be missing out on some of that growth in retirement.”
Payne warned that by pulling funds out when the market dips, investors end up losing the opportunity for things to bounce back and seeing their balance grow.
“The first thing we want to do when it’s bad is to pull out,” said Payne. “You can make changes; just don’t make them so significant.”
Avoiding drastic actions due to market fluctuations doesn’t only apply to younger TSP holders, Payne said, urging everyone to allow their investments to recover if they can.
“Even if you’re close to retirement, you should second guess whether moving it to something more conservative is in your best interest,” said Payne. “That’s the key question you have to ask yourself: ‘What is my risk tolerance?’”
As Payne herself is approaching retirement, she said she’s confident in her recommendation.
“I tell people to just sit tight and hang on,” said Payne. “Be patient and let the market adjust. That’s what I’m doing.”
Payne said the bottom line when it comes to finances is that it’s all personal to each individual. She advised evaluating what feels most comfortable in terms of risk, and then base decisions on what’s right with all things considered.
Although it can feel unnerving when funds drop, Payne said getting an early start and understanding the cyclic tendencies of the economy is essential when investing.
“It’s all about time,” said Payne. “The earlier you invest, when you get ready to retire you could very easily be a millionaire because you’ve got forty-something years for money to both lose and grow.”
Editor’s note: To learn more about financial readiness or take advantage of ACS financial counseling, call 502-624-5989.