The Markets & Your Retirement
It was approximately 16 months ago that we first discussed the coronavirus in these missives. At that time history was telling us that while viruses have a habit of forming frequently, rarely do they have effects on a global scale.
Covid-19 is an outlier.
No matter how you feel about Covid-19, it has had a major effect. Life hasn’t been normal.
But maybe the markets have been acting normally all along.
First a massive sell-off in March 2020 as the markets recalibrated the potential economic risks of the Coronavirus.
Then, the government pushes massive amounts of money into the system, eliminating much of the short term risk.
Finally, a massive rally higher in the markets, Tesla, NFT’s, SPAC’s, Bitcoin/Crypto, Bonds and Real Estate.
Yes, (almost) everything is going up.
A record 96% of the components in the all-encompassing Wilshire 5000 have seen positive returns in the past 12 months.
Stimulus, bailout and economic reopening. All at the same time. Driving markets higher.
Too much money chasing too few assets you say? Chasing assets you’ve never even heard of before…A non-fungible token? A SPAC’s?
But still, the question becomes…
Will a market crash and hurt my retirement?
(Crash = 30% decline of the broad market indexes)
US Stock Markets – If the US Economy doesn’t show up as the markets expect it will, will the markets crash?
If Tesla (and other amazing companies like it) – can’t shore up it’s long-term profit picture, will the markets crash?
If Bitcoin were to crash it would take more than a trillion dollars with it. Yes, 1 trillion dollars. More likely, the entire cryptocurrency market. Will the markets crash?
And finally, the housing market. Everyone is saying it’s different this time but with 2.7 million homeowners still not paying their mortgage (as of February), what will the effect be as these homes come to market after the government protections relent. Will the markets crash?
But before you attempt to answer these questions (which, in all reality, you cannot!), maybe focus on questions you can answer!
- How do I reach my retirement goals?
- How much do I need to save for retirement?
- Can I afford to retire/what can I afford to spend in retirement?
- What is my necessary rate of return needed based on my retirement goals?
- How do I need to invest for my retirement?
- How do I turn my 401k/IRA into retirement income?
- Should I pay off my house before retirement?
- When should I take social security? How much will healthcare cost?
- How will I address long term care needs/not burden my children?
And when you know the answers to these questions, you’ll have the answer to this question: Will a market crash hurt my retirement?
The only way to answer these questions? Create a real retirement plan.
Want answers now? Contact me here to learn about Creating a Financial Plan for Your Retirement.
Please Note: Speak to your tax, legal or financial advisor for specific advice about your particular plans and situation.
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John R. Bubello is an investment advisor representative of and offers investment advisory services through Compass Retirement, LLC, a registered investment adviser offering advisory services in the State of Connecticut, State of Florida, State of North Carolina and other jurisdictions where registered or exempted.