Will Brexit Hurt Your Retirement Funds?
The recent Brexit vote has left many people across the world reeling for various reasons. While some are concerned about how it could affect their ability to move throughout Europe, many others are worried that this move could have an impact on their retirement funds – even though it has been suggested that the negotiations and actual process of Britain leaving the EU could take up to two years to process from start to finish.
A Potential Worse-case Scenario for Financial Markets
According to an article published on USAToday.com, the Brexit is already delivering a bearish blow to what are regarded as risk assets – such as stocks. These have already plunged in Asia and the trend looks set to continue elsewhere in the world for a while as well. Axel Merk, chief investment officer at Merk Investments said before the vote took place, “The market is looking for an excuse, or trigger, to sell and might well get one. The market believes a potential Brexit is a very serious thing for risk assets.”
Director of international portfolio management at RiverFront Investment Group, Chris Konstantinos, said before the vote took place that the impact on the market would be “negative everywhere, but acutely felt in the U.K.” where the largest proportion of economic uncertainty and damage would be experienced.
US Economy Could be Affected
An article published on CNN Politics mentioned that there is the potential for Brexit to harm the U.S. economy – especially if there is a significantly negative market reaction that is experienced as a result thereof. Chairwoman of the Federal Reserve, Janet Yellen said recently that the Brexit vote “could have consequences for economic and financial conditions in global financial markets. It if does so, it could have consequences in turn for the U.S. economic outlook.” She further mentioned that the risk associated with Brexit had a direct effect on the Fed’s recent decision to not increase interest rates.
How this Could Affect your Retirement
As with any other major world event that takes place, there is the potential for your retirement investment to be affected, particularly if you have mainly invested in the stock market or used other offshore savings and investment options. This is a prime example of why you should ensure that your retirement investment portfolio is as diversified as possible – in other words, do not keep all of your eggs in one basket so to speak. If possible, make use of a combination of investment strategies – and don’t discount the more ‘boring’ options such as regular savings accounts, government bonds or even CDs.
There is nothing wrong with being concerned about how events such as Brexit will affect your retirement nest egg. In fact, if you are worried, it shows that you are taking this time of your life seriously and you want to be as financially prepared as possible for it. If you would like to find out more about how you can diversify your retirement income or you would like to make your first investment, contact our advisors here at Dream Bridge today.