As we have all learned in recent months, the stock market can be unpredictable and even a little bit scary. If you want to protect your retirement plan from sudden downturns, you may want to look into moving your retirement funds. Take a proactive stance toward protecting your fund while times are good, so that you can lessen the impact when Wall Street issues its unpleasant surprises.

Analyze your plan. Check in with your financial advisor regularly, and assess your asset allocations. If you’re like most people, you probably chose to diversify your funds across various stocks and bonds. But different investment strategies may suit your needs best at different times. The first step is to get a good idea of how your money is invested.

Take a look at the worst-case scenario. Your money is invested across a variety of options, but what percent is subject to the highest risk? With your financial advisor, calculate your worst possible scenario based on losing a substantial amount to risky investments. You need to get a clear idea of how much you stand to gain in a serious market downturn. To balance your outlook, it’s also helpful to see how much of your money is protected by relatively low-risk investments.

Calculate the potential damage. Now that you know how much money you stand to lose in the worst-case situation, calculate the long-term impact on your retirement plan. Would you still be able to retire when you planned? Would you be able to cover living expenses, or would you have a shortfall during retirement? Talk to your financial advisor about balancing risk and potential for growth, and make sure you aren’t risking more than you feel comfortable losing.

Keep in mind that worst-case scenarios are rare. But if you’re overly anxious about the possibility of a major market crash, having a plan in place may help to ease your fears.

14107 – 2015/2/13