After Brexit: Retirement Planning and Market Exposure

Brexit came as a shock to almost all of us on this side of the “pond.” Rapid market fluctuations that occurred in the aftermath of Britain’s decision to depart from the European Union made it clear that Brexit would impact more than just the British and Europeans. While tame in comparison to the British bourse and the value of the British pound, U.S. stocks tumbled in the days following the Brexit vote. American stocks have since rebounded, but investors are left with valid concerns about how markets near and far impact retirement planning.

Why Do Events Like Brexit Impact the American Economy?

As the world’s most dynamic economy and the birthplace or headquarters of more large multinationals than any other country, America will feel the effects of any major event that riddles international markets. Thankfully, the broad dynamism of the American economy means our economy is also poised to weather shocks like this without risk of long-term devastation.

Will Brexit Matter in the Long Run?

The short answer to this question is: it depends. Broadly speaking, the U.S. economy has limited exposure to the U.K. Unless your retirement portfolio is heavily exposed to the U.K. or the EU or you plan on relocating to Britain or Europe, your retirement portfolio shouldn’t be deeply affected by Brexit. If you plan to retire in the very near future, your portfolio may also be more affected. The long-term impact of Brexit is difficult to predict and will take years to play out, but most likely won’t be extraordinary for most Americans looking to retire five or more years down the road.

How Can I Shelter Retirement Savings Against Future Market Calamities?

Portfolio diversification is the surest way to protect your retirement plans from being quashed by a single market-shaking event. To protect your retirement savings and plans from local and global market volatility, allocate some of your money toward financial products that are unlikely to ebb and flow so suddenly. Balance out heavily exposed retirement planning you do with the acquisition of less volatile products, such as life insurance and annuities.

Retirement planning can be quite complicated, but it’s important to know how the products in your portfolio might be affected by events beyond your control. If you have additional questions about how markets impact your retirement, speak with an experienced financial advisor. If you’re an independent broker or advisor who would like to be able to tackle questions like these that your clients ask, call Brokers Alliance at (800) 290-7226.