The rate of inflation has reached an all-time high. The S&P 500 index is falling at a rapid pace. War has broken out throughout Europe. Therefore, how many individuals successfully prepare for retirement amid such challenges?
Should they invest with a greater sense of urgency? Perhaps with more caution? Should you go back to work? Work longer? Should we move to a region with lower living costs?
There is no shortage of concerns over how to fund retirement. This is very relevant in current times. The monthly IBD/TIPP survey for April zeroed attention on one obstacle. 40% of respondents said they were most concerned about the expense of healthcare. It was closely followed by their concern for the significance of the economic uncertainty on their savings. For respondents from the senior age group, concerns about taxes and inflation also scored highly among their top fears. The respondents in the youngest age bracket (18 to 24 years) are concerned about taxes and housing expenses.
However, how does one prepare for the future, whether five years from now or 30 years from now, given that the world is making it more challenging to prepare for retirement? “To answer your question in a nutshell: No, you can’t. You can’t make plans with complete assurance,” Ric Edelman, a well-known author, radio commentator, and financial counselor specializing in personal finance made this statement.
Making Plans for Retirement Despite Uncertainty
However, this does not imply that it is impossible to start preparing for retirement right now. Because of the fast pace at which essential aspects have shifted, some of your expectations need to be readjusted. Edelman continued, “It is a pipe dream to believe that you can construct a plan right now that will cover the next thirty years. Instead, you should work on devising a plan that will get you through this time of unpredictability.”
The explanations for this are glaringly obvious. In March, inflation skyrocketed to an annual rate of 8.5%. Since 1981, it was the year that had the highest rise in the cost of living. Only in April, the S&P 500 had a decline of 8.8%. According to data provided by Dow Jones Market, it was the company’s worst April since records began in 1970. So, the value of your 401(k) and your IRA has probably decreased since the beginning of this year. And the same goes for some of your hopes and expectations about retirement.
It Is Time to Take A Defensive Role In The Planning Of Your Retirement
In terms of your preparations for retirement, this indicates that it is now time to take a defensive rather than an offensive stance. You should avoid making significant financial movements or purchasing expensive items until necessary.
According to Judith Ward, a financial counselor and a vice president of the massive mutual fund complex T. Rowe Price, making poor decisions in the present might leave you with less cash, the worth of which could rise in the subsequent rally.
And keep your money invested in diverse funds that already exist. In this manner, you will be able to benefit from the first wave of the subsequent rally, which is often an unexpected spike up. When it comes to individual equities, you should have some cash on hand to be prepared to reinvest when there is a proven rise. Edelman advised those in attendance to “remind themselves that the market has always come back.”
The stock market has recovered from various crises, including global wars, the Great Depression, the Great Recession, the dot-com crash, and other economic downturns. Edelman said, “Do not make costly changes that you can defer for a few months, a year, or even two,” saying that you should not do so. For the time being, sound retirement planning involves getting through the current market doldrums in the best possible form to capitalize on the next bull market when it arrives.
The following are the actions necessary to do it
There are still some “Dos and Don’ts” on the market. Ward encouraged the audience to keep making investments. Especially when it comes to mutual funds, you should fight the urge to convert your investment into cash. Why? During times of extreme market volatility, individual shareholders of mutual funds rarely sell their holdings near the market’s peak. In addition, they seldom, if ever, enter the market when it is at its lowest point. As measured by the S&P 500, the general stock market saw an annualized increase of 7.31% for the decade that concluded on December 31, 2015.
You should keep your stock mutual funds in their current state because the price of shares has dropped. As a result, you will get a greater number of shares for the same amount of money that you are presently contributing to your retirement accounts. Ward states that “it assists in your accounts taking off whenever the market ultimately returns.” The part of your savings portfolio that you use to pay current routine expenditures, whether you’re retired or have huge upcoming needs, is not included in the “stay the course” advice that applies to the long-term component of your portfolio.
Contact Information:Email: mackhales@bellsouth.netPhone: 7705402211Bio: Mack Hales has spent the past 4 decades helping clients prepare for retirement and manage their finances successfully. He also works with strategies that help clients put away much more money for their retirement than they could in an IRA or even a 401k. We involve the client’s CPA and/or their tax attorney to be sure the programs meet the proper tax codes.
Mack works with Federal Employees to help them establish the right path before and after retirement. The goal is to help the client retire worry-free with as much tax-free income as possible and no worries about money at risk of market loss during retirement.
Mack has resided in Gainesville, GA since 1983, so this is considered home. Mack is married to his wife of 51 years, has two boys and five grandchildren.Disclosure: Investment advisory services are offered through BWM Advisory, LLC (BWM). BWM is registered as an Investment Advisor located in Scottsdale, Arizona, and only conducts business in states where it is properly licensed, notice has been filed, or is excluded from notice filing requirements. This information is not a complete analysis of the topic(s) discussed, is general in nature, and is not personalized investment advice. Nothing in this article is intended to be investment advice. There are risks involved with investing which may include (but are not limited to) market fluctuations and possible loss of principal value. Carefully consider the risks and possible consequences involved prior to making any investment decision. You should consult a professional tax or investment advisor regarding tax and investment implications before taking any investment actions or implementing any investment strategies.
