After weeks of resistance, the U.S. stock market has been laid low by the global spread of the coronavirus (COVID-19). From February 19th through February 27, the S&P 500 fell more than 11%, as the reality set in that our economy will slow at least temporarily as production in major supply markets (namely, China) is curtailed, and consumer spending may decrease.
The coronavirus slide is just the most recent example of how using a three-bucket strategy can make it easier to stay calm(er) during stock sell-offs. With plenty stuffed in a cash bucket and a bond bucket, you can generate the income you need—and take any required minimum distributions(RMDs)—without needing to touch your stock bucket when it is down. But what else can you do?
Tap your cash
Sam Stovall, managing director of U.S. equity research at CFRA, has crunched stock data dating back to World War II and found that when losses are relatively mild (less than a 20% decline) it typically takes no more than four months or so for markets to recover. When a bear descends with losses of 20% or more, the average recovery time is around two years.
Start a side business
One of the safest ways to diversify your income is to create a side business or freelance service. Strategize your choice of a side business by treating it like an apprenticeship. Even if you just want to mow lawns and do some gardening on weekends, use these jobs as an opportunity to figure out how to squeeze in some small business bookkeeping, work on your marketing skills, and upsell clients.
Add a bond buffer
At this life stage you likely have 50% or more of your portfolio invested in bonds. That means that at least half of your portfolio has actually increased in value during the stock slide that started on February 19th. The Bloomberg Barclays U.S. Aggregate bond index —the benchmark tracked by core bond funds— is up 1%. If you are using Treasury bonds in your portfolio, you’ve likely seen an even bigger gain.
Diversify your portfolio
It’s never wise to have all of your financial eggs in one basket, regardless of how safe that seems. Simply throwing everything you have into the same retirement fund without diversification might work out — or it might prove to be a big gamble. You may still end up with a decent retirement, but chances are you could have made hundreds of thousands, if not millions more, simply by diversifying your funds. Domestic stocks, bonds, index funds and REITs, plus ETFs, are just a few places to start.
Pay down all of your debt
Diversifying your income involves paying down your debt. Free up your income by aggressively paying down credit card bills, loans and even your mortgage. Side hustles and upselling clients is one way to find the income to lower those bills, but you can also get creative with techniques like putting your debt on a credit card with no interest fees for a year. Just make sure you pay it off quickly, of course.
Fresno Retirement Advisor Takeaways
When it comes to Fresno retirement planning Soutas Financial puts your future first. Don’t forget these great reminders: It is worth the effort to protect your retirement funds from the ups and downs of the Coronavirus market swings. Consider the following ways: Tap your cash; start a side business; add a bond buffer; diversify your portfolio; and pay down all of your debt.
Diversifying your retirement assets among a variety of vehicles and alternatives—both insurance and investment oriented, depending on what is appropriate for your situation—may offer you a better chance of meeting your retirement income goals throughout your lifespan. We help our clients with problems sometimes associated with retirement such as stopping spend down and avoiding probate. In doing so we leverage stop spend down as well as long-term care strategies designed to help accomplish those goals.
When searching for Fresno financial advisors, look no further than Soutas Financial & Insurance Solutions Inc. your Fresno financial advisor is committed to helping take the complexity out of retirement planning. By using a variety of insurance and investment strategies that focus on Asset Protection, Long-Term Care Strategies, Legacy Planning, Tax-Efficient Strategies, IRA, 401(k) & 403(b) Rollovers, Life Insurance Annuities, Medicare, we can help you develop an overall retirement income strategy specific to you and your family. We have a strong team of professionals helping ensure you receive all the assistance you need not only in developing your retirement income strategy, but in maintaining it throughout your retirement. Contact us today at 559-230-1648 or visit us today at Soutas Financial to get your retirement plans on track for success!
Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and Soutas Financial & Insurance Solutions, Inc. are not affiliated companies. California Insurance License # OK48173
Soutas Financial & Insurance Solutions Inc.
333 W. Shaw Avenue Suite 106
Fresno, CA 93704
We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial or investment advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.
905978 – 05/21