Atlanta Financial Blog

Within 10 Years of Retirement? Here’s How to Protect Your Financial Plan

Within 10 Years of Retirement? Here’s How to Protect Your Financial Plan

Cathy C. Miller, MBA, CFP®, CRPS®, CDFA™
May 20, 2020

Are you an investor who was planning to retire in the next ten years? Do the current market conditions make you fearful for your future?  

The recent decline in domestic and global markets has been undeniably rough for investors, especially those nearing retirement. Our 11-year bull market run came to an end in March when all major domestic indices dropped dramatically in one of the swiftest declines into a bear market we have seen.  Although the markets have since recovered from those bottoms very significantly, uncertainty abounds due to the ongoing global pandemic.  It is only natural to be concerned about how to approach retirement against a background of such uncertainty and volatility.

As a pre-retiree in the home stretch, your first instinct may be to protect your retirement income. On the one hand, this instinct is correct. On the other, experts warn against taking dramatic steps with your investments when the market is down.

So, what can you do to protect your financial plan in this difficult economic climate? 

  • Maintain Adequate Liquidity for Emergencies: Maintaining liquidity refers to keeping a certain percentage of your funds in a space where you can easily exchange them for cash should you run into an emergency. In more favorable market conditions, this could mean bonds or other fixed income investments, since they are bought and sold with relative ease and generally offer stability of principal. However, at times like these you may want the extra security and stability offered by cash-based investments, like checking or savings accounts, or higher-yielding money market funds. 
  • Don’t Touch Your Retirement Savings: Even though the most recent legislation under the CARES Act is temporarily allowing investors to take loans or distributions from their 401 (k) plans to help make ends meet during the COVID-19 economic disaster, it is best to leave these assets alone. Not only would you be selling your assets at a depreciated value and losing out on time in the market, you would be depleting funds you will need in a few short years for your retirement.

Remember, you don’t actually lose any money in your investment accounts until your investment is sold. Even if your account balance is lower today than it was yesterday because of volatility, you have yet to incur any tangible loss. 

  • Review Your Allocation to Manage Risk: You may have had a perfectly balanced portfolio at the start of the year, but market selloffs and dramatic swings can quickly shift that balance.  For many investors, the market downturn means the market has already shifted your allocation to a more conservative mix, since stocks will have fallen further in value than bonds.  For some investors this will feel comfortable, while for others it may create an opportunity to rebalance back to target (selling bonds and buying stocks – in essence “selling high and buying low”).

 As the market recovers, it is important to stay on top of your mix to make sure stocks don’t become a larger portion of your portfolio than you feel comfortable with.  Most importantly, if you have found yourself losing sleep over all the market gyrations, it’s time to check in with your AFA team to discuss your comfort level and review your goals, since adjustments may be needed.   

  • Continue Making Contributions: One of the most important steps you can take to remain on track with your financial plans is to continue making contributions to your retirement and investment accounts. If your plan is offered through an employer, make sure you are at least meeting the minimum to receive your employer match. If you are able to contribute more, allocate funds now through the end of the tax filing period to hit the max annual contribution. 
  • “Double Down”: It may seem counterintuitive to contribute more to your retirement accounts or brokerage accounts in this uncertain economic climate, but doing so can improve your overall position when the markets rebound. Essentially, buying assets at a depressed price means that you are able to purchase more of that asset than you normally would. Kind of like buying an outfit that is on sale—you can purchase more with the same amount of money. If you can afford to invest more and stomach possible volatility in the meantime, you can position yourself to make the most of the expected recovery. 
  • Guard your Cash Flow: One of the most helpful steps you can take during uncertain times is to trim your expenditures where possible. Building extra cash reserves can increase your comfort during uncertain times, and trimming expenditures can free up more funds for savings and reduce unnecessary withdrawals from your investments.  The silver lining to the coronavirus cloud we are all currently under is that quarantining has done some of the “trimming” of spending for us.  Many people are realizing how much of their monthly budget actually went to dining out, recreation and travel. For now, those unspent dollars can boost your emergency funds and your savings.

This quarter’s market volatility has shaken the confidence of many investors hoping to retire over the next ten years, but that doesn’t mean that your retirement date or financial plans have to be moving targets.

Have you been wondering how you can keep your own financial plan on track? Or feel you might need a second opinion on your current plan?

The advisors at Atlanta Financial are here to help. Through our proprietary FIT™ planning process, our goal is to guide you toward financial independence together. This process has been designed to empower you to make the best financial decisions, no matter the stage of your life or cycle of the market.

Contact us today to learn more about how our FIT™ planning process may benefit you.

Share This:

Share on facebook
Facebook
Share on linkedin
LinkedIn
Share on twitter
Twitter
Share on google
Google+

Atlanta Financial Named to the 2020 Financial Times 300 Top Registered Investment Advisors List

Atlanta, GA – July 30, 2020 – Atlanta Financial is pleased to announce it has been named to the 2020 Financial Times 300 Top Registered Investment Advisors list. The list recognizes elite independent RIA firms from across the U.S. This year’s impressive cohort of RIA firms represents 39 different states and Washington, D.C. and has a median AUM of $1.9 billion. Today, July 30th, Financial Times celebrates the 2020 FT 300 RIAs by publishing the Financial Times 300 list as a special report in the Financial Times.

Read More »

Legacies: The DOs and DON’Ts of Receiving an Inheritance

Losing a loved one is very disorienting. If an inheritance is associated with the love one’s passing, that gift can cause a host of emotions, conflicts and decisions.  Whether you knew about the inheritance or not, it can be overwhelming to receive a lump sum of money or property. I know this from both personal and professional experience.  With experience comes insights, and I would like to share these insights with you as a “dos and don’ts” list.

Read More »

Could the 529 Be the Holy Grail of Asset Protection?

These days, physicians face increased risk from lawsuits, judgements, creditors, and malpractice claims, yet one of the most common mistakes they make is relying solely on their insurance policies to protect them in these high-stakes situations. Not only do they overestimate just how far their personal and professional coverage will go but they also generally have no backup plan to pick up where their policies leave off. So, how do you protect your income and estate from legal claims? By integrating a number of diversified asset protection strategies into your overall financial plan.

Read More »

Julianne Andrew’s Featured in Medical Economics

Recently, Julianne Andrews MBA, CFP®, AIF® was featured in Medical Economics’ Money news section. In an interview, she walks through some steps physicians can take to protect their personal assets. Julie states, “There’s a few of things you can do, a lot of times people want to hop to very complicated things right off the bat, but there’s some very simple things you can do that will protect your assets.” You can view the short interview video by clicking here. 

Read More »