The current financial headlines say it all. The first 6 months of 2022 were the worst to the start of a calendar year for the S&P 500 since 1970! Yes, interest rates and inflation are higher than a year ago. The economy may be slowing and a recession is possible, although not guaranteed. You know our philosophy and if you read our recent market update we emailed on June 21 you know we don’t recommend selling during a market downturn or trying to perfectly time when things will begin to recover.
What should you do? Depending on your stage in life we have a few thoughts.
Accumulators – still working: You’re still working and have at least 3 years until retirement. You should be somewhat excited about the bear market (don’t tell your parents this). Why? You get to continue buying shares of mutual funds and ETFs at lower prices than 6 months ago. Keep up with your 401k contributions and regular monthly investing. If you have a more than adequate emergency fund set aside, consider adding to your portfolio. Buying low is better than waiting for a recovery and buying at higher prices later.
Pre-retirees – within 1-3 years of retirement: It’s time to review your cash/savings amounts. The typical 3-6 months living expenses in an emergency fund should increase as you get closer to retirement. Although we don’t recommend you sell stock funds during a bear market, we do recommend you consider building up your cash savings as retirement approaches. You can do this by reallocating new monthly investments or 401k contributions to something safer such as a money market fund, short term bond fund, or Series I savings bonds (non-retirement funds only).
Retirees: It’s a good time to review your actual income needs and current cash reserve amounts. Are you spending all the money you’re pulling from your investment accounts/IRA/401k? If not, maybe reduce the distribution amount so you keep more of your money invested. If your cash reserves are more than 12 months living expenses maybe think about using cash to live on for a few months rather than taking distributions from investments. This will give your investments more time to recover from the recent declines. Depending on your circumstances, maybe consider delaying larger purchases if possible.
Regardless of your stage in life, if you have questions about your specific situation and what you should do now, feel free set up a time talk with us. We are here to help!