Retirement: Impact Of Missing Out On The Market

For some, success stretches beyond reaching the top of the corporate ladder, buying the house you always envisioned, providing the kids with the best education, and travelling to dream destinations on vacations.

For some others, saving enough to live a comfortable retirement is true success. Attempting to save the whole amount one hopes to set aside for retirement would be impractical. The disparity between the increase in income and the rapidly rising inflation further tightens the space to save.

A gap will always exist between the savings and the target amount. Investing is one method that has the potential to bridge that gap.

One can start by evaluating factors that are either within one's control or completely out of your control in the retirement plan. There are elements like asset allocation, saving, and spending that are actually in one's control. Employment, earnings, and longevity are elements that may not be completely under one's control.

An individual cannot control market returns, government tax policies, and other factors when making investments. There are also elements that increase with age, such as disability.

This may even have a direct impact on the age that one retires in, as 35% take early retirement due to health problems or disability. The cost of care has also increased to $278,000 for women and $200,000 for men, according to JPMorgan Guide to Retirement.

"Average spending is highest at midlife. Those at older ages tend to spend less on all categories except health care and charitable contributions," the report said.

While building a retirement corpus, one must invest with a different attitude altogether. It is important to perceive market movement, taking into account the time horizon you have.

The market may experience volatility and even tough times. While building a retirement corpus, one needs to measure the impact that one rough day might have in the long run.

“To gain a sense of control by selling out of the market after the worst days is likely to result in missing the best days that follow. Investing in a well-diversified portfolio for the long term can result in a better retirement outcome," JPMorgan Guide to Retirement said.

Investors need to constantly steer clear of the pressure to book profits and exit just to gain a sense of control. Being out of the market simply because of a temporary situation or day does not equate to protection of principle.

It's advisable to remain invested during challenging times and only take a profit or rebalance if you believe the change will enhance the portfolio over time.