Objective information about retirement, financial planning and investments

 

Stock Market Highs and Your Retirement

Share

After a significant drop in March of 2020 in the wake of the pandemic, the S&P 500 has staged an amazing recovery. The index finished 2021 with a gain in excess of 18%. So far in 2021, the index is in record territory and has closed at a record level 52 times so far this year.

Difference Between Stocks and Bonds

At some point we are bound to see a stock market correction of some magnitude, hopefully not on the order of the 2008-09 financial crisis. As someone saving for retirement what should you do now?

Review and rebalance 

During the financial crisis there were many stories about how our 401(k) accounts had become “201(k)s.” The PBS Frontline special The Retirement Gamble put much of the blame on Wall Street and they are right to an extent, especially as it pertains to the overall market drop.

However, some of the folks who experienced losses well in excess of the market averages were victims of their own over-allocation to stocks. This might have been their own doing or the result of poor financial advice.

This is the time to review your portfolio allocation and rebalance if needed.  For example, your plan might call for a 60% allocation to stocks but with the gains that stocks have experienced you might now be at 70% or more.  This is great as long as the market continues to rise, but you are at increased risk should the market head down.  It may be time to consider paring equities back and to implement a strategy for doing this.

Financial Planning is vital

If you don’t have a financial plan in place, or if the last one you’ve done is old and outdated, this is a great time to review your situation and to get an up-to-date plan in place.. Do it yourself if you’re comfortable or hire a fee-only financial advisor to help you.

If you have a financial plan this is an ideal time to review it and see where you are relative to your goals. Has the market rally accelerated the amount you’ve accumulated for retirement relative to where you had thought you’d be at this point? If so, this is a good time to revisit your asset allocation and perhaps reduce your overall risk.

Learn from the past 

It is said that fear and greed are the two main drivers of the stock market. Some of the experts on shows like CNBC seem to feel that the market still has some upside. Maybe they’re right. However, don’t get carried away and let greed guide your investing decisions.

Manage your portfolio with an eye towards downside risk. This doesn’t mean the markets won’t keep going up or that you should sell everything and go to cash. What it does mean is that you need to use your good common sense and keep your portfolio allocated in a fashion that is consistent with your retirement goals, your time horizon and your risk tolerance.

Approaching retirement and want another opinion on where you stand? Need help getting on track? Check out my Financial Review/Second Opinion for Individuals service for detailed advice about your situation.

NEW SERVICE – Financial Coaching. Check out this new service to see if it’s right for you. Financial coaching focuses on providing education and mentoring on the financial transition to retirement.

FINANCIAL WRITING. Check out my freelance financial writing services including my ghostwriting services for financial advisors.

Please contact me with any thoughts or suggestions about anything you’ve read here at The Chicago Financial Planner. Don’t miss any future posts, please subscribe via email. Check out our resources page for links to some other great sites and some outstanding products that you might find useful.

Photo credit:  Phillip Taylor PT

 

Financial Fraud – Tips to Protect Yourself

While Bernie Madoff passed away in April of 2021, financial fraud is still very much an issue. Along with the "old fashioned" types of fraud, we now have cybercrime to worry about. Financial fraud is all over the news. Whether high-profile Ponzi … [Continue reading]

4 Steps to Make Your 401(k) Work as Hard as You Do

Whether you work as an employee or you are self-employed you work hard for your money. In spite of what was said on PBS Frontline The Retirement Gamble and elsewhere in the press, in my opinion 401(k) plans are one of the best retirement savings … [Continue reading]

Choosing A Financial Advisor? – Ask These 6 Questions

Deciding to hire a financial advisor can be a tough decision for many investors. Once you've made this decision, how do you go about finding the right advisor for you?  Here are six questions to ask when choosing a financial advisor:  How do you … [Continue reading]

4 Reasons to Accept Your Company’s Buyout Offer

Companies will use buyout packages for groups of employees from time-to-time to provide those employees an incentive to leave the company. The company may have a variety of reasons behind their desire to reduce their workforce, such as reducing … [Continue reading]

The Super Bowl and Your Investments

Tampa won one of the more boring Super Bowls in recent memory. As investors, let's hope the Super Bowl Indicator is accurate for 2021. For more see below. It’s Super Bowl time and once again my beloved Packers are not playing for the tenth … [Continue reading]

401(k) Fee Disclosure and the American Funds

With the release and subsequent repeal of the Department of Labor’s fiduciary rules for financial advisors dealing with client retirement accounts, much of the focus in recent years has been on the impact on advisors who provide advice to clients for … [Continue reading]