If you've been paying attention you know that it's a very difficult time for investors right now,
and that's especially true if you are retired or nearing retirement. It's undoubtedly causing
at least a little bit of anxiety and so you may wonder what exactly does this mean for you and
your income? So if I may make a suggestion there is something that is really important to look at
right now and it's not the daily movements of the markets or even your account statement,
although that's going to be an important piece of information perhaps in what we look at,
but I think there's a step that you can actually take that can really help you through times like
this and whether it's this time right now or the next time, whenever that happens to be, this is a
tip that can help you get through these events. Now the market downturn is certainly a problem,
especially for people who are in retirement or near retirement, and of course, that's because as
the markets go down and you're taking withdrawals, each withdrawal takes a bigger bite out of your
portfolio and makes it a little bit more difficult to sustain a lifetime income. That's called the
sequence of return risk that you've probably heard about. Younger investors might welcome this type
of volatility or these downturns because they're still adding money to their Investments and when
prices go down, that helps them out. They can buy more with each salary deferral out of their
paycheck or each Roth contribution that they make, but for you, this could be a little bit
more difficult. And to complicate things, even conservative investors have seen some
surprising losses, and that's because both bonds and stocks have gone down at the same time. So,
we typically expect those bonds to provide some ballast and maybe offset some of the ups and
downs in the stock market but this time, at least, early in the year it hasn't necessarily been the
case in you know a 60 40 portfolio for example has suffered quite a bit. Bond holdings have suffered,
so it is really a difficult period if that's what it feels like it is unusual. So, here's
what I would suggest: If you are feeling anxious about this, take stock of exactly where you are
right now, review your retirement plan, and see what the impact of these events has been so far.
This is what I do with my most skittish clients, and we can look at exactly where they are and
what they're trying to do, and in some cases, we find that this hasn't really derailed them, that
they're actually going to be okay. If a plan was built to account for these types of events, and
we never know when they're going to occur or why they're going to occur, but it is wise to assume
that they will probably occur at some point, and here one is, then the plan can often absorb this
type of event and if that's the case, you might be looking relatively good right now even though
the account statements are kind of ugly and even though the headline are very ugly, you might be
in reasonably decent shape. Now, if that's not the case, it may be time for some modest adjustments
you know tweaking some dials here or there or you might even need to make some dramatic changes.
Hopefully that's not the case, but either way, the sooner you know where you stand, the better
off you are. So as you go through this process, go ahead and update those balances in your retirement
plan if they don't automatically get updated through a feed or something like that, and maybe
consider shaving off a little bit more if you want to assume that things could head farther south
if you're going to do a more pessimistic type scenario. Now remember that we've been through a
pretty difficult time and anything is possible really anything is possible we could go much
lower, we could rebound, we could kind of churn sideways for a while I mean anything is possible,
but after a difficult period like this you know think about "Well, do I think it's really likely
that that will repeat, will we have another 50 percent loss after what I've been through or not?"
This is ultimately something that you would decide or work through with your financial planner but
go ahead and update those balances and take a look at where things stand. We've also got inflation so
that might be something to update in your plan now I don't know if High inflation is going to last
for the rest of your life I'm not sure I would bet on that again anything is possible, my crystal
ball is broken at the moment, but be careful about assuming that we're going to have let's say high
or double digit inflation for decades, especially if you're in your 50s or 60s something like that.
That could end up dramatically altering how your plan looks so maybe do some what-if scenarios you
can go ahead and evaluate that and then you know maybe just just for Giggles look at a scenario
where inflation is not quite as dramatic. Once you you have some clarity on your situation,
then the next steps might become clear, and hopefully the answer is that yes, you did build
a resilient plan that is able to absorb this type of event and of course more could come later but
that's good news if you don't need to make major changes right now and that could very well be the
case especially if you're relatively well off or if you've just done a nice job of preparing
for things like this. But if that's not the case, then it's time to start looking at some difficult
decisions now hopefully any adjustments you need to make would be temporary let's hope that but you
know the specific actions are going to vary from person to person. As just one example,
this is ultimately going to sound like spending less and the fact is that it is because that can
help you reduce the withdrawals you take and the impact on your portfolio but you could consider
skipping your inflation adjustments for a year or two or whatever the case case may be and yes
that is taking out less and spending less but if you think about it as a rule or as a systematic
adjustment it may seem more temporary because we're skipping inflation adjustments during
difficult years but in good years perhaps you can resume those inflation adjustments and continue a
more generous withdrawal rate. Ultimately, all of these fixes and adjustments are more than I
can get into in a short video like this but what I want you to know is that once you understand your
situation once you take stock and take a look at does it affect you and how much and how so, then
that's a good first step that can help you start either feeling better or moving towards whatever
it's going to take to feel better about how things are right now. Thanks for watching, and take care