Market Volatility Got You Down?

The last few months have been a wild ride for investors.  The stock market has seen volatility that we have not had in several years.  This can often be worrisome for investors, but it can also represent an opportunity.  As people near retirement and balances in 401(k)s and IRAs grow, these rough times can induce heartburn in even the most seasoned of investors.

At times like these it’s important to think about your overall strategy, and to remember a few key points.  First, think about your overall asset allocation and how you arrived at the mix of investments you currently have.  If your investment mix made sense six months ago, chances are that it still makes sense.  On the other hand, market fluctuations do a great job of helping people realize if they are actually more conservative investors than they previously thought they were.

One thing I occasionally hear from investors as they near retirement is that they cannot afford fluctuations in their retirement portfolio because they are about to retire.  While this may be true to a certain extent, consider this: a male and female couple, both aged 55, have a 50% chance of one of them living to age 91.6*.  That’s a significant length of time in retirement, and being too conservative with your investments has the potential of being as detrimental as being too aggressive.

Remember that the market being down presents certain opportunities as well.  If you have cash sitting on the sidelines, it may be a good time to invest.  Are you worried that the market may go lower?  Invest that cash over a period of a few months—this is the same concept as dollar cost averaging into your 401(k); you take the guesswork out of trying to invest at the market bottom.  If the market continues lower, you are making additional purchases at a lower price.  Also, if you have positions that you have been thinking about selling, a market dip may present an opportunity to realize a loss that helps on your taxes.  Of course, consult your tax advisor when employing such a strategy.

If you’re concerned about how the recent market volatility is affecting your portfolio and your probability of a sound retirement, set up a meeting with your advisor.  If we can help, contact us today for a no-obligation consultation.

*Male and female joint life expectancies based on Annuity 2000 Mortality Table.

Is 70 the New 60?

I’ve been fortunate enough to be in the investment business for nearly a quarter century at this point, and I’ve made an observation over the past few years about the changing demographics in our country.  These changes have had a profound impact on quality of life, when people retire, and in turn on the workforce.

When I was growing up, I distinctly remember people being bound to wheelchairs or using walkers because they had arthritis and could not walk.  Now, through artificial joints and physical therapy, it’s rare to see this situation any more.  How many of us have friends or relatives (or ourselves!) who have artificial knees or hips?  This is an astounding improvement in quality of life, in just the past twenty or so years.

Also, through innumerable improvements in medicine, life expectancy is well into the eighties now.  I have plenty of clients who are in their late seventies and early eighties and are totally involved in the management decisions on their accounts.

But here is the major shift I’ve seen over the last ten or so years: people are working longer.  They are doing this for the reasons I’ve already mentioned; they’re healthier, for the most part they seem happier, and so they feel like continuing to work for a longer time, particularly if they own the business.  This has had a ripple effect down the line through many industries, however.  I recently had lunch with a couple of attorneys who have been out of law school for about ten years.  When they got out of school, the market for new attorneys was relatively good.  Now, many of the older attorneys are still working.  They are the partners (owners) of the firm, so they can’t be fired or forced out, and they make the majority of the earnings.  This has resulted in newly minted attorneys being hired as clerks or attorneys at very low salaries.  This is happening in many industries. 

As an aside, there are a couple of lessons to be learned here.  One is that it is imperative for graduates to have some sort of advanced degree to earn a higher salary coming out of school, and even then it is sometimes difficult.  The flip side (and happy part of the story) is that many people who are happy with their work are able to keep chugging along.

One of my big takeaways in working with retirees over the years has been that people who retire and have some sort of project or small “job” they are dedicated to seem to be much happier and also much healthier than those who retire and “go home and sit on the couch”.  I’ve seen these activities range from church involvement, helping to raise grandchildren, managing real estate holdings, volunteering for various organizations throughout the week, and board memberships.  The point is, they all have something that keeps them going on a regular basis, gives them social interaction, and challenges them mentally. 

Life expectancy is much longer than it was even twenty-five years ago, and so as people approach retirement age, they face a much happier choice than in years past—if they are healthy and happy in what they do for a living, should they continue to work, or retire, and make sure that they have plenty of activities to keep them occupied and give them a sense of worth and value.

Do you feel it’s time to start planning for your retirement?  Schedule a no-obligation appointment to review your present plan, your investment allocation, and strategy for retirement income, as well as discuss how you plan to efficiently pass on your estate and receive the Survivor’s Notebook—a sixteen- page workbook that is designed to help your survivors identify your advisors, accounts, where key documents are located, and so forth.  Feel free to contact me if you feel I may be of assistance at (865)474-8115 or monte@crestpointwealth.com.