Market Overview

Don’t worry. It’ll be okay.

This past year was the worst for stocks in a decade. Last month was the worst December since 1931. If you’re about to retire, these two facts might have an apocalyptic sound to them, but there’s nothing inherently disastrous about either of them.

As long as you have the right perspective and are taking the right steps, then you should  be able to retire in comfort just as you planned.  “How does one get perspective?” you might ask.  We’d say to create a plan.

Managing expectations

You’ve been reading a lot of year-end roundups, and so have we. If you’re going to compare December 31, 2018 with December 31, 2017, then yes, the more recent date had lower closing-bell numbers than the year-earlier. If you were to measure the last day of last year against September 31, 2017, instead of December 31, you’d have a much different perspective. Markets are dynamic and sometimes volatile.

Comparing one point in time with another just because it was 365 days earlier doesn’t always provide the best perspective.  Now, let’s say the 365 days in question are those leading up to your retirement.  Knowing your time horizon and investment objectives presents a context in which you can create a plan which guides your financial decisions in a meaningful way based on your goals.

Also, let’s remember that in the grand scheme of things a 5% drop over the course of a year isn’t a huge loss – not when you compare it with the 30% wipeout of 2008. Also, it’s little more than a regression to the mean when considering 2017’s 20% rise.

Frankly, a week or two of solid corporate earnings news could make up that entire deficit. Alternately, one joint press conference convened by Presidents Trump and Xi could erase it in an instant.

Process leads to performance

Double-digit investment returns don’t come out of a can.

In times like these when your portfolio’s performance is giving you heartburn, it might be time to quietly reflect on your investment process and adjust your planning.

Remember that, whatever happens, you will still be getting benefits from Social Security and related government programs. You have equity in your home. If you’re still healthy and feeling productive, you can defer retirement a year or two until the market comes back, or even work in retirement – preferably at something you’re passionate about.

“But I want to live off the investments I earmarked for retirement!” That’s an entirely rational position.

There are things you can do at any stage of your process to maximize those investments.

• Set more cash aside. The market will come back eventually. Consider that this might be the dip you should buy on. And even if it doesn’t come back as strong as you’d hoped, you’ve still taken money that you might not need today and squirreled it away for the time when you will.
• Reexamine the mix of investments. We have, in this space, talked about the process of self-examination in terms of risk and how that drives portfolio mix. We invite you to re-read that content and then, if you find the process difficult, seek out help.
• Reexamine the best mix of investment vehicles. We have also talked about Roth IRA, non-Roths, “backdoor” Roths and all kinds of more esoteric vehicles. Perhaps it’s time to revisit your selections.
• Talk to your advisor. That markets go up and down is to be expected. It’s only the timing that’s unexpected. When faced with a moment like this, maybe it’s the right moment to talk with someone who has been around this block a few times.