If I’m worried about the market, should I change investments?

If I’m worried about the market, should I change investments?   Larry from Lancaster, WI


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If I’m worried about the market, should I change investments?

In the 2008 crash and its aftermath, $2 trillion of Americans’ retirement savings were wiped out in just 15 months, according to the Congressional Budget Office.

The market recovered, of course — but for clients nearing or in retirement, a market downturn may be something they simply can’t afford to endure. Without enough time to make up for the damage to their portfolios, they won’t be able to fund the retirement lifestyle they had envisioned.

For those within five years of retirement — five years before or five years into retirement — taking a big loss in a bear market can completely change their lives.

That’s why a clearly defined exit strategy to get out of the markets before you lose too much is important.

While many advisors are proponents of “buy and hold” the majority of those within five years of retiring, the top priority is simply not losing money. Risk management and asset protection are the most important to them.

There are three portfolio enemies that financial plans should address: inflation, taxes and bear markets.

Historically, the stock market is one of the best inflation-fighting vehicles we have available but the important thing, of course, is to only have as much stock market in your portfolio as is necessary to accomplish your financial goals.

Taxes also play a big part in the decision-making process, especially lifetime taxes on retirement accounts.

The most significant threat to early retiree portfolios is bear markets. We believe it is incumbent upon us as financial advisors to do all that we can to protect our clients from catastrophic losses.

Having an exit discipline requires a change of philosophy. We need to first accept that buy, hold and sell is better than just buy and hold.

What you need is a business plan for life. This strategy is based on cash flow, tax, and risk impact, rather than products and investments, and can effectively deal with multiple what-if scenarios at any point in time. Most financial plans presented today are nothing more than elaborate sales gimmicks based on insurance and investments.

So, to change investments or not depends more on your business plan for life than what is happening in the market. That said, if you are 5 years or so before retirement or if you have retired within the last five years or so, then it is critical for you to review your “business plan” as too much market risk could dramatically change your retirement.

For more information, to request a free copy of our book or to submit your questions, go to www.CreatingYourDreamRetirement.com

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Michelle Bertram and Beverly Bertram are financial advisors living in Mineral Point WI and serving the surrounding communities. Michelle Bertram does financial planning for retirees along with business consulting. Beverly Bertram specializes in retirement planning and income planning for her clients. Michelle Bertram and Beverly Bertram are authors of the book, Creating You DREAM Retirement and creators of the DREAM Retirement Process.
Serving Madison WI, Verona WI, Mount Horeb WI, Barneveld WI, Dodgeville WI, Dubuque IA, Platteville WI, Lancaster WI, Cuba City WI, Fennimore WI, Darlington WI, Monroe WI, Spring Green WI, Black Earth WI and beyond.

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