Market volatility can trigger powerful emotional responses in investors, often leading to rash decisions that compromise long-term financial health. It’s important to temper these emotions and also consult a financial professional to provide perspective. 

There are unique investment products within America’s retirement plans such as stable value and retirement income that can help mitigate this market volatility. BRN’s Jeffrey Snyder discusses this market volatility with Jayson West of Lincoln Financial.

Investment strategies to weather a volatile market (17:42)

Jeff Snyder: This morning on BRN, investment strategies that help you weather a volatile market. Joining me now to discuss this and a lot more, Jayson West is with Lincoln Financial. Jayson, always great to see you.

Thanks for joining us on the program this morning.

Jayson West: It’s great to be here, Jeff. Thank you.

Snyder: I always love tapping into your knowledge and you give such a great sense of perspective when it comes to recent market events. And to that end, Jayson, the last few months we have seen a dramatic amount of volatility. We’ve had talk of tariffs, we’ve had global geopolitical tensions, and it’s had a marked impact on the stock market.

But Jayson, let me start by asking you, this is kind of what happens in a retirement plan because you’re talking about a very long time horizon and it’s about how you deal with the market volatility as an investor.

West: Well, you’re absolutely right, Jeff. The market has ups and downs and we expect to see these periods of volatility as a natural part of investing. Lincoln’s perspective is built on the long term.

We believe that time in the market beats timing the market. And if you haven’t heard that before, what we mean is that consistently investing for the long term is a much better strategy than reacting to the market’s ups and downs and trying to predict the right time to buy or sell. However, we know that watching your account balance drop can be unsettling for investors, but there are a few things investors can do to help reduce their risk and their overall stress levels.

First, have a conversation, a personalized conversation, with a retirement professional like a financial advisor or a retirement consultant. At Lincoln, our retirement consultants spend their time every day having personal conversations with participants about their goals, their circumstances, and the products and services available to them through their employer-sponsored plan. As a part of that conversation, participants can discuss their risk tolerance and their retirement goals.

Asset allocation is also a key part of investing and should be determined based on that individual investor’s risk tolerance. While a diverse portfolio can help, it’s important for investors to understand that their personal risk tolerance when making financial decisions. For example, a participant in their 20s is often invested in higher risk options with more time to weather volatility in the market.

On the flip side, a participant approaching retirement is likely invested in lower risk options. While they may not see the rapid gains possible in the market, they’re also better protected against downturns with a more stable portfolio. So, meet with a financial professional.

Second, participants in an employer-sponsored retirement plan often have access to more retirement products and services than they may realize. Within their retirement plans, there are investment products such as stable value funds or guaranteed income solutions that can help with stability and consistent income in retirement. At the end of the day, we tend to overcomplicate retirement planning, but it doesn’t have to be complicated.

In fact, most employer-sponsored retirement plans are designed to remove a lot of the guesswork.

Snyder: Jayson, you mentioned the plan investments, and now we’re really focused on the employer-sponsored plan. One of those was stable value, and I’m hoping you can educate me and vis-a-vis the audience on what a stable value fund is and what does it mean for stability during difficult market situations like what we’ve been experiencing.

West: Sure. Absolutely, Jeff. So, you think about your retirement plan and the options that you have available to invest in.

Stable value options are conservative investments that offer steady income and guaranteed principal. They’re designed to help protect your contributions, to insulate you from day-to-day market volatility while providing steady returns, along with an attractive interest rate and liquidity. Stable value investments can play a key role in a participant’s investment allocation strategy, providing stability for a portion of their investments.

As designed, when the market drops, you don’t lose money as you continue to receive interest. Stable value funds invest in high-quality government and corporate bonds, as well as short-term and intermediate-term bonds. Although they’re like bonds, they differ in that they are insured by an insurance company or a bank.

The insurance company or bank are contractually obligated to protect the funds investors have for any loss of capital or interest. And lastly, I would say that these investments, stable value investments, they differ in other ways. For one, stable value investments are often available only in tax qualified retirement savings plans, whereas money market mutual funds can be offered in a tax qualified plan, but also more broadly in other non-employer-sponsored plan accounts.

Snyder: Yeah, and the difference between the two products is dramatic in terms of the guarantee and, of course, the return that we’re talking about. Jayson, the other investment that you talked about was guaranteed income. And I was wondering if you could go into a little bit more detail.

I think I know what the term means, but what does it mean for the long term, especially as I get to retirement? And I’m not that far off, Jayson. What does it mean to getting to retirement and into retirement?

Sure.

West: Okay, so let’s first think about it this way. Depending on how old you are, our parents and grandparents had pension plans at their place of employment. They didn’t contribute directly to those pension plans.

Instead, their employer would contribute on their behalf. And when they retired, they would receive a check every month for the rest of their life. It was a great deal for the employee, but at the same time, very expensive for the employer.

As a result, very few companies provide pension plans today. The retirement industry recognized the gap that existed there and developed a way to offer a pension-like program inside an employee’s employer-sponsored retirement plan. They’re now called in-plan guarantee products and offer a way for employers to give their employees access to reasonably priced products in their plan that can do just that, guarantee income in retirement.

What’s interesting about in-plan guarantee products is that almost unanimously, participants are saying that they would invest in these products if they were offered within their retirement plan. And that makes sense because we’ve probably all heard that the biggest concern people have about retirement is outliving their savings. Participants want a guaranteed income.

They want guaranteed income for life after they retire. They want a pension with monthly income that will not decrease no matter market performance, et cetera. For most participants, retirement plan assets are their highest value asset.

Second only to their homes. So making protection a priority of this asset is popular among participants. Jeff, we insure our homes against loss of value due to weather, fire, et cetera.

These products allow participants to insure their retirement savings and future income in much the same way. They’ve worked hard to accumulate these savings and they want to hold onto them.

Snyder: Jayson, these are all important investments in a retirement plan, but what if I’m someone in a plan that, hey, I need a little bit more guidance. I need direction. I’m not an investment expert at all.

What are some of the options available to that type of retirement plan investor who needs guidance and assistance?

West: Yeah, sure, Jeff. So you’re talking about personalization. You think about it in our lives.

There is a lot of forced personalization out there. We see it every day. Our phones are tracking us and they’re giving us personal ads on our phones.

If I watch a war movie on Netflix, I’m going to get suggestions for other war movies on my profile. If we’re getting that level of personalization on something so trivial as movies, why not on something as complex and emotional as retirement? Managed accounts are a great way for participants to get that level of personalization in their retirement plans.

While managed accounts, they leveraged the core record keeping data for the foundational level of customization. Participants can further tailor their accounts based on individual goals, preferences, or even outside assets. A participant can get advice on other areas of their retirement strategy beyond investments, such as advice on retirement age, savings rates, social security, and just other retirement income.

Plus, and this is critical, participants in managed accounts tend to stay the course during market volatility rather than trading out of equities at inopportune times.

Snyder: Jayson, these market events, as you talked about, have happened time to time. They impact our ability to buy goods today, but also to plan for our retirement futures. What do you say to a retirement investor, someone thinking about and wanting to plan for the future, but they’re kind of struggling with maybe paying for gasoline, some of the increased food prices that we’ve been experiencing?

How do you juggle with the expenses of today versus the retirement planning of tomorrow?

West: Sure. Yeah, Jeff. So we all have competing financial priorities, right?

Staying focused on retirement is critical, but it’s a long game. Life can throw curveballs every day. So we also know that sometimes retirement planning isn’t the most important financial consideration for an employee at that time.

The real question is, how do you get back on track so that you can start or resume saving for retirement? One of the ways that we can do this is by encouraging the use of financial wellness tools that put the power to manage goals and find resources in the hands of employees. This can help them manage stress through budgeting, loan repayment solutions, and more.

Through a recent study, we saw that 77% of employers who used financial wellness programs and tools saw a positive impact on their workforce. When we look at the numbers, the majority of workers surveyed, they’re financially stressed. They don’t have any money set aside for emergencies.

Their debt is a problem. And all of this results in a negative impact on their productivity at work. And when you hear that, it’s easy to see why employees are struggling to save for retirement.

But the beauty of these tools is that they help employees get a good look at the problem and make a plan to address it all in one place. Within our tool at Lincoln, we have a marketplace where you can access things like debt management solutions, finding student loan options, emergency saving solutions, health saving solutions, and more. The reality is most people have more than one financial priority.

Assessing what is most important to you and making a plan to pursue it is a really important part of securing your financial future. I also think it’s important or worth noting that other insurance benefits can help as well. There’s nothing like an unexpected health emergency to derail your debt management plan or your retirement savings.

Benefits like accident or critical illness insurance are often available through your employer. And those policies pay a cash benefit in defined circumstances, which can help you pay bills out of pocket instead of adding to your debt or dipping into your retirement savings.

Snyder: So Jayson, what I’m, and some of this is like my life experience. I mean, I’ve lived through ups and downs in the market. I remember the dot-com bubble.

I remember the 87 drop-off, the Black October drop-off. I remember 2008. So what I’m hearing is market volatility happens.

You need to be prepared for it, but a sense of perspective will help you manage your retirement program on a long-term basis.

West: That’s absolutely true. And look, in general, our perspective is that, you know, it’s never too late. No matter when you start planning, take some form of action and that will help set you up better for the future.

It’s a much better option and outcome than doing nothing or just throwing in the towel. Now, when we say take action, we don’t mean change your investments strategy. The best action plan is sometimes to do nothing, stay the course, stay invested for the long-term and trust that the strategy you have in place is the right one.

But if you find yourself in a position where you’re looking for more stability in your investments and in retirement income, or you want to discuss changing circumstances, meet with a financial professional. A sense of security is part of our philosophy around retirement planning. Knowing that your financial future is secure is central to who we are and how we serve our customers and their families each and every day.

There is no one-size-fits-all solution to retirement planning, but I believe that everyone can find a solution that works for them. Our goal is to help individuals retire on their own terms and with dignity. Jeff, all it takes is a plan.

Snyder: Absolutely. Well, Jayson, it’s always great to see you. Thanks for joining us this morning and we look forward to having you back on the program again.

Thanks for having me. Yeah, see you next time. Thank you.

And don’t forget to subscribe to our daily newsletter, The Morning Pulse, for all the news in one place. Details, of course, at our website. And your subscription helps support all this great BRN content.

We’re back again tomorrow for another edition of BRN. Until then, I’m Jeff Snyder. Stay safe, keep on saving, and don’t forget, roll with the changes.