What record stock prices mean for your retirement

Stocks are at record highs.

Since Donald Trump’s presidential election, each of the three major US stock market indexes have rallied sharply. Amid this ascent to new highs in the stock market, volatility has declined.

Combine a calm in markets with new highs and turbulence in Washington, and it’s fair to ask if this all is a reason to worry about markets or your retirement savings? The short answer, however, is no.

For one thing, market history does not suggest that periods of calm are followed by market declines. According to research from Goldman Sachs, in each of the six periods since 1980 when the S&P 500 has gone 80 or more days without a 1% drop, stocks were higher a year later each time.

Additionally, all investors and savers should be aware that markets do decline at some point in almost every year. In all but one of the last 89 years, the S&P 500 has declined at least 4.4% from peak to trough. In three-quarters of those years, the drop was 10% or more.

On average, the stock market rises about 7% per year, but this does not happen in a straight line. And if you’re trying to build wealth by investing in the stock market, the most important thing to keep in mind is that the amount of time you spend invested in the market more than timing the market. In other words, do not try to sell stocks at highs and buy stocks at lows if you’re in it for the long haul. Instead, try to put a little bit of money in the stock market each month and don’t let interim fluctuations change your plans.

And, ultimately, what the market does or doesn’t do on any day is beside the point of saving for retirement. As Harold Evensky, a CFP and chairman of Evensky & Katz Wealth Management, told Yahoo Finance earlier this month, “The advice to hold steady remains as good as it was during the past world wars, recessions, tech boom and bust and grand recession and other ‘unique’ times with one exception; it’s not buy and forget but buy and manage.”

Planning for retirement really rests on being able to answer three questions reliably:

• How much money can I afford to save now?

• How long do I expect to work for?

• And how much money will I need to retire?

The answers to these questions, unlike the daily fluctuations in the price of stocks or any other financial asset, are ones you can reliably answer yourself. And answers that will keep you on track.

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Myles Udland is a writer at Yahoo Finance. Follow him on Twitter @MylesUdland