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Mastering Retirement Journal

Election Fears

Two things they say you should avoid around holiday dinners are politics and religion. These are contentious subjects, to be sure, and when it comes to how we view our money, the first can often impact the decisions we make. The question is, as we enter a heated Presidential election in 2024, should it?

As a thought experiment, if we looked in the rearview mirror and only invested while our party (Democrat or Republican) held the Presidency, we would have wildly underperformed the person who took no action regardless of administration. Our friends at BlackRock looked back to 1953. They found that staying one-sided would have cost you 90% of your gains. That’s for both parties.

So, if it isn’t the party that matters – should we worry when elections happen? One theory on market volatility (or lack thereof) is that uncertainty roils markets. Said another way – when the Presidency and Congress control may completely switch from one party to another, the business outlook may be significantly different. Often, when one party controls multiple branches of Government, the largest policy changes can occur. For investors, this means uncertainty around business prospects and, thus, their investments. You might say this could cause more buying and selling than usual. Our friends at T. Rowe Price deeply investigated volatility and performance during election years. Their data seems to support some of that thesis. Looking at the S&P500 index data back to 1928, volatility is meaningfully higher in the year before an election and right up to the election and gradually recedes in the 1 year after.

Investors re-adjusting to business prospects can happen for a number of reasons, but elections sure seems like it could be one of those things that in the short-term may cause more bumps in your portfolio than usual.

So, should you make decisions around election periods? Often the right approach to investing means a combination of different things. In this case, we don’t want to completely divest to avoid the other side of the aisle. Clearly, that will cause more harm than good. Second, if more volatility occurs – this could be an opportunity to take advantage of markets, invest new cash, execute tax moves, re-position, or utilize the dry-powder investments we’ve saved for a rainy day anyways. For most people, this should represent an opportunity to continue to build your wealth on a well-executed plan in the short and long-term and not incorporating our personal views with well laid investment plans.

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What We’re Reading: Mid-Year 2024 Edition

Retirement, a phase of life many look forward to, is evolving in fascinating ways. From financial planning to lifestyle choices, staying abreast of the latest trends and insights is crucial for anyone approaching or enjoying retirement. Here’s a curated selection of recent articles that delve into intriguing retirement topics:

1. How to Vet the Financials of A Continuing Care Retirement Community – WSJ

Continuing Care Retirement communities are becoming increasingly popular and relevant discussions for retirees. An important consideration is how sound the community is and how that may affect your future there. This article is an excellent primer on the subject.

https://www.wsj.com/personal-finance/retirement/financials-continuing-care-retirement-community-5e0fe954?st=ymdjzku4fnmn47g&reflink=desktopwebshare_permalink

 

2. 8 Little Known Facts About RMDs – Christine Benz, Morningstar

This is an excellent article from Retirement researcher Christine Benz on some commonly missed rules regarding RMDs. The rules have been changing lately, so this is an important one!

https://www.morningstar.com/retirement/8-little-known-facts-about-required-minimum-distributions

 

3. Federal Open Market Committee Minutes – June 11-12, 2024 – Federal Reserve System

Curious about where interest rates are headed? There is no better place to look than the Federal Reserve’s latest meeting minutes and forecasts. We look forward to these meetings and releases and pay close attention to their contents.

https://www.federalreserve.gov/monetarypolicy/fomcpresconf20240612.htm

 

4. Inflation Puts More Retirees at Risk of Running Out of Money – Anne Tergesen, WSJ

We’ve said for a long time that inflation is a retiree’s worst enemy. Anne does a nice job summarizing the how and why in this article for the Wall Street Journal.

https://www.wsj.com/personal-finance/retirement/inflation-retirement-savings-withdrawals-b73caa41?st=syoskafzon86b32&reflink=desktopwebshare_permalink

 

5. Social Security’s Financial Outlook: The 2024 Update in Perspective – Center for Retirement Research at Boston College

Are you worried about the future of Social Security and its solvency? This updated report from the Center for Retirement Research gives some great perspective on where we might be headed.

https://crr.bc.edu/social-securitys-financial-outlook-the-2024-update-in-perspective/

 

These articles offer a glimpse into the diverse aspects of modern retirement living. Whether you’re planning for your retirement or already enjoying it, staying informed about these topics can help you make informed decisions and enhance your overall retirement experience. Keep exploring, keep learning, and make the most of this exciting phase of life!

Happy reading and happy retirement planning!

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Is Your Financial Advice Holding You Back?

Man with suit and grey hair

3-minute read

A Look Back on Financial Planning and Software

Financial planning for retirement has been an established industry for at least 30 years at this point. The software for doing the planning has come such a long way. At the time,some of the earliest packages were still being run on DOS-run computers, if you remember what that was. One of the first financial planning software packages was called Leonard 2000 in 1993. At the time, and still, financial planners used to often say, “Let the software crunch the numbers first, and then we’ll decide what financial steps to take after that.” Made sense, but many people today are still not doing much detailed software-based planning. The different results found by doing detailed planning versus an individual advisor postulating what you should do can be dramatic. The advice you’ve been given, therefore, if it’s not been done with proper planning, software, and a few scenarios run, could really be holding you back from some great retirement advice.

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