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Stock market declines can rattle retirement savers. What about when the market plunges, as it did at Monday’s opening, falling deep enough that a circuit breaker was triggered?

MagnifyMoney, a LendingTree subsidiary, in October asked 740 Americans with a retirement savings account what percentage decline they could tolerate before abandoning stocks.

Nineteen percent of respondents said they would tolerate no more than a 5% market decline before giving up on stocks for retirement, even though slightly larger declines are becoming commonplace in today’s market, according to MagnifyMoney.

A third of investors in the survey said they could tolerate up to a 10% market decline before they would take their money and run.

Only 22% of investors said they would leave their retirement funds in the stock market no matter how large a decline.

“Volatile markets can make us feel uncertain or scared about the future, and our survey shows that many Americans’ first instinct is to flee with their money, locking in a loss which may leave them out of potential market rebounds and meaningful gains,” Josh Rowe-Heupler, general manager of investing for LendingTree/MagnifyMoney.

“Anxiety around the stock market is normal, but that doesn’t mean investors should automatically act on those emotions.”

Rowe-Heupler said sticking to one’s financial plan or asking a professional for help was a good way to combat fear amid uncertainty. “A financial advisor can be an excellent resource to help keep consumers from making decisions that they may later regret.”

The survey results showed that baby boomers had a stronger stomach for a stock market decline than younger investors. 

Thirty-eight percent of boomers said no market decline would prompt them to give up on stocks in their retirement plan, compared with just 18% of Gen Xers and 16% of millennials.

Here’s how the different generations responded with regarded to increasing market declines:

  • Up to 5%: boomers – 18%; Gen Xers – 19%; millennials – 18%
  • Up to 10%: boomers – 23%; Gen Xers – 38%; millennials – 36%
  • Up to 20%: boomers – 17%; Gen Xers – 16%; millennials – 19%
  • Up to 30%: boomers – 3%; Gen Xers – 10%; millennials – 11%

Survey respondents who identified as Republicans exhibited a higher tolerance for stock market declines than those who identified as Democrats. Twenty-five percent of Republicans but only 19% of Democrats said they would stay in the market whatever the size of a decline.

The results showed that just 13% of parents with children under 18 would keep their retirement funds in stocks no matter how large the decline, compared with about 30% of parents with adult children or no children.

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