Month: November 2020

Financial experts often recommend that investors keep some amount of stocks in their nest eggs, even in retirement, because a measure of growth is important in order for a portfolio to keep pace with inflation. But I’m often asked if the risk is worth it. Let’s explore that topic.

Retirees who are getting by just fine on income from Social Security and savings may think it’s crazy to take on the risk of fluctuating stock prices for a little more growth. That’s understandable. The global financial crisis in 2008 showed us how easily the market can destroy the value of a nest egg. So what’s an investor nearing retirement to do?

On the one hand, if you are absolutely certain that you can live comfortably for the rest of your life on Social Security and savings and you don’t want to leave money to children or other beneficiaries, you have a good case for avoiding stocks. There is just no reason to take on the risk.

But the phrase “absolutely certain” is key. Are any of us “absolutely certain” at any time? What about unforeseen circumstances? Your living expenses could go up more than expected because inflation is unpredictable. Perhaps you take on some expensive hobbies (sailing, golf). Maybe you experience a costly medical crisis. You could even be the unfortunate subject of a lawsuit. Any of these predicaments could move your plan off course and do so drastically.

If those possibilities worry you, you may want a little extra cash on hand to absorb unexpected expenses. And if so, the growth potential of stocks may be appealing to you. A large allocation isn’t necessary: you just need enough to give your portfolio a little more growth potential.

If you would like to discuss your asset allocation, please reach out to me. I can help you understand your options, given your individual circumstances.

The U.S. Federal Reserve is pumping money into the economy to stimulate it after the COVID-19-induced slowdown. That raises fears of inflation, and when people fear inflation, gold often becomes appealing.

Why? Historically, gold has been considered a safe haven in times of geopolitical and financial instability. Unlike financial assets and currency, gold cannot be printed at will. It also tends to perform differently from other assets, which is why investors often use it as diversification in a portfolio of stocks, bonds and real estate.

Might you want to consider gold now? Over the past 10 years, inflation has averaged less than 2% annually, but the recent monetary stimulus and rising national debt mean investors would be wise to prepare for a rise in inflation.

On the other hand, no investment is a sure thing, and gold is no exception. Its price can fluctuate widely. Gold was priced at around $250 an ounce in the 1990s and is close to $2,000 an ounce in September 2020. However, from the 1990s until today, gold prices have been volatile.

Moreover, investing in gold isn’t straightforward. There are many ways to purchase it. You can buy gold, stocks in companies that invest in gold, or even index funds that track companies that invest in gold or the spot price of gold. It can be a complex undertaking.

If you have questions about investing in gold, please give me a call. I would be happy to go over them with you.

We have seen a lot of volatility in the markets in 2020, thanks in part to the impact of the COVID-19 pandemic.

From March through May of 2020, more than 40 million Americans (roughly one in four workers) filed for unemployment benefits. The US Federal Reserve (Fed) cut interest rates to zero. And oil prices plummeted. All of this impacted a variety of securities. But do events such as these always affect your portfolio? Not necessarily.

As an example, let’s look at oil prices. They tumbled because of the dynamics between oil producers Russia and Saudi Arabia. Russia refused to cut oil production in order to keep prices for oil at moderate levels. This conflict resulted in a steep drop in oil prices (around 30%) in the first few weeks of March 2020.

As another example, consider central banks’ actions earlier this year. When COVID-19 shuttered the US (and global) economy, central banks took bold emergency actions to support the economy, cutting their target interest rates, among other things.

You could be affected by these situations, regardless of whether you hold oil stocks or international stocks because fear is contagious. What happens in one market may affect another. But it’s important to put such situations in perspective. For example, there are many segments of the energy sector (such as utilities) that are not directly impacted by volatility in oil prices. And some energy companies (such as exploration and production companies) are used to fluctuations in oil prices and prudently manage their liquidity to stay afloat within lower-price environments.

If you’re worried about market volatility affecting your portfolio, please let me know if I can help you navigate market fluctuations and make decisions that are best for you. I’m here to help, and I am just a phone call or email away.

Retirement brings freedom from many responsibilities but creates others. You may want to consider these five responsibilities as you approach retirement.

Create a budget. How much income will you obtain from Social Security, pensions and other retirement savings? How much money will you spend? Ensure that your income is greater than what you spend (or the numbers are equal).

Allocate your assets. Do you have the right amount of risk in your portfolio? You probably shifted your investment portfolio toward income as you approached retirement, and you will probably want to do so even more once you retire.

Do some estate planning. Estate planning is not just for the wealthy; it simply refers to getting your estate in order for transition whenever it should happen. You will likely need a will, a power of attorney and a health care proxy, and you should keep beneficiary information on your financial accounts and insurance policies current.

Develop a nonfinancial plan. A happy retirement is about more than finances. If you don’t know how you want to spend your time in retirement, it is easy to become depressed. Think about how you will stay mentally and physically active and engaged.

Get advice. As a retiree on a limited budget, getting financial advice is important. It can result in significant tax savings and accurate transition documents, such as wills and powers of attorney.

Would you like to learn more about planning for retirement? Please call or email me to review your current situation and determine the appropriate path forward.