There is little question that the coronavirus pandemic is top-of-mind for most of us. Currently, however, surveys show that financial concerns top the worries about health threats. This is understandable considering we have not had a true down market in many years, and some investors forgot what it feels like to see red on their monthly statement. Below I will highlight a few strategies to help ease the anxiety about protecting your nest egg as well as opportunities available due to the current economic conditions.
Fear about losing money
I have had many conversations over the past three months with clients on how Covid-19 will affect their future retirement date and their current retirement lifestyle. One strategy that we implement that has eased some anxiety is the concept of the "war chest." We refer to this as a client's cash and short term fixed, readily accessible income. Typically, we have approximately three to five years of income available for our clients before we would have to touch their stocks, giving them some peace of mind. This strategy allows them to wait out a volatile market while giving their stocks time to recover. Also, this is a great time to revisit your risk tolerance. It is easy to answer risk profile questions when things are going well. However, if you felt extreme anxiety or loss of sleep over the market conditions in March, we need to have a conversation about how you are invested and if your current asset allocation is still the right fit for you.
Areas of Focus
Regarding Financial Planning, there have been several opportunities that have been presented due to the impact of the virus.
Here are a few examples of action steps to take in these current economic conditions.
Review your estate plan. You need to make sure your current wishes are still being represented. We can assist with a plan to pass on your wealth as tax-efficiently as possible.
Tax planning and tax harvesting, which is just a fancy term for taking some losses to offset the many years’ worth of gains that have accumulated in your portfolios.
For many whose income has been affected, this could be a great year to do a ROTH conversion. (we will have another blog on this topic alone).
Look into a REFI! We have helped multiple clients refinance their mortgage at an extremely attractive rate. Mortgage rates right now are at all-time historical lows. This is a great way to free up monthly cash flow and save on years of interest.
When will the crisis end? Americans are divided, but most see significant challenges for the next few months. A Wall Street Journal/NBC News poll found that six in 10 voters said the "worst is yet to come." But a Gallup study found that 38% believe the situation will begin to improve in a few more weeks, and half say it will improve in a few more months.
I won’t make any predictions on when Covid-19 will pass, but eventually, it will. I want us to be able to look back and know that we confidently weathered this storm and took advantage of ways to improve our long-term financial situation for ourselves and our families.
Arthur Strauss, CFP®
Investment advice offered through Strauss Financial Group, Inc., a Registered Investment Advisor.
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