Don’t let Coronavirus Derail Your Financial Plan

July 17, 2024
coronavirus

Unless your retirement savings are primarily comprised of tech and mining stocks, there is a good chance your investment accounts may have taken at least a slight hit following the onset of the coronavirus pandemic.  Tech and growth stocks are clearly emerging as safe havens of sorts while value stocks have either declined or stagnated.

Making matters worse is the high unemployment rate and seemingly rising level of underemployment.  Though the economic picture may look quite dire for the short-term, you have the power to keep your financial plan intact, ensuring your retirement in Sun City West, Scottsdale or another part of Arizona can go as planned.

Do you want financial peace of mind? Contact Prime Wealth Advisors and see how we can help.

Hold Steady Through the Current Economic Trough

A little more than a decade ago, stocks fell more than 50% during the Great Recession.  All in all, the nation has endured half a dozen bear markets and four recessions across the past 40 years.  The moral of this story is stocks always climb back, returning to their pre-recession values and ascending even higher in due time.

So don’t give in to temptation and unload your investments due to the foreboding economic uncertainty.  It is nearly impossible to properly time the market.  You need a diversified investment portfolio complete with an array of stocks, ETFs, mutual funds, bonds, and more to mitigate risk, keeping you on the path to retirement at a reasonable age.

The lesson that could be learned is to continue making consistent retirement contributions regardless of the state of the economy.  These consistent contributions will help you retire in accordance with your original retirement timetable.  Retiring in your 50s or 60s gives you the opportunity to enjoy a high quality of life throughout your golden years in Scottsdale, Sun City West, or another part of the Grand Canyon State.

Mind Your Withdrawal Rate

If you are within half a decade or less of retirement, it is imperative you review your withdrawal rate.  A safe approach to retirement account withdrawals is particularly important now that we are in the midst of an unpredictable pandemic.  In general, it is prudent to abide by the 4% rule.

Withdraw 4% of your portfolio in the initial year, hike this amount by the rate of inflation in the years that follow and you won’t have to worry about running out of money across the next three decades of retirement.

However, a flexible approach might make it easier for you to withdraw more or less money.  Spend within reason and you can potentially boost your retirement savings withdrawal rate.  In fact, you may be able to gradually increase this percentage in years to come as long as you continue to tighten up your budget should the market drop.

Should You Skip the Required Minimum Distributions?

If your investment portfolio has decreased in value since the start of the pandemic, it might be wise to bypass the required minimum distributions.  The COVID-19 relief package empowers individuals to skip distributions from individual retirement accounts and 401(k) plans for the upcoming year.  Bypass these withdrawals and you will give your beaten-down investment accounts that much more time to bounce back from their losses.

The Assistance of a Financial Advisor Mitigates Risk

Every investor needs a plan to minimize risk while simultaneously ensuring his or her money works as hard for them as they did for it.  Meet with a financial advisor for guidance and you will have a clear plan moving forward to keep your investment risk at a reasonable level, grow your nest egg even when the economy stagnates or contracts and remain on track to retire in your 50s or 60s.

Your financial advisor will review your unique asset mix, determining whether your investments lack diversification, are overexposed to risk, underexposed to risk, or need other alterations.

Your asset mix will largely be determined by your current age, your target age for retirement, and your unique risk tolerance.  If you are within a couple years of retiring, your financial advisor will help you select the optimal mutual funds, ETFs, CDs, bonds, and money market accounts to add to your wealth without subjecting your hard-earned money to significant risk.  Your financial advisor will also help keep your asset mix properly balanced and on track to meet your goal for retirement through periodic rebalancing.

As an example, redistributing money from your portfolio’s superstar stocks and ETFs to underperforming investments in a gradual manner will restore the optimal mix.  Even opting for comparably low-cost funds that charge less than actively managed funds will help boost your returns in the years to come.  These are just a few examples of the insight and guidance a financial advisor will provide to help you stay on track for your target retirement date.

Financial Advisor Services Tailored to Your Retirement Goals

Your financial advisor should not insist there is only one optimal strategy for retirement saving and investing.  Rather, this professional should present numerous retirement investing strategies for your review, highlighting those that are optimal for your unique position.  Your financial advisor should be willing to custom-tailor the subtleties of the selected strategy to your idiosyncratic financial picture.

Recognize the Importance of a Collaborative Financial Advisory Firm

Financial advisors worth their keep do not operate in silos.  Elite financial advisors embrace the opportunity to collaborate with others, continue to learn, and retain an open mind.  Your financial advisor should work hand-in-hand with other professionals including estate planners, tax specialists, and even attorneys to provide truly comprehensive retirement planning that accounts for all potential challenges.

This cohesive approach to financial planning accounts for longevity risk while fully personalizing investment strategies to each client’s unique financial picture, ultimately setting the stage for a truly enjoyable retirement in Scottsdale, Sun City West, or another part of Arizona.

At Prime Wealth Advisors our mission is to help our clients achieve a secure and comfortable retirement. We take the time to get to know our clients and their unique situations and then work with them on a financial plan. We are able to offer planning, investing, insurance, tax, and legal services to our clients-all under one roof. Contact us today for a complimentary consultation.

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