It’s been a difficult year in the investment markets. And most people feel like they should “do something” when markets are down 20% from their peak. Generally, I counsel clients that if their goals have not changed, then their investments should not change much during a market correction.
But there are a couple of things some people should consider now that markets are down.
For people still working and actively saving for retirement. This is a great time to increase payroll deferrals. Right now, $1,000 of payroll savings buys the same number of shares of investments that $1,250 bought in January. Great investments are on sale. Don’t miss out.
For people with IRAs. Consider a Traditional IRA to Roth IRA conversion. With the current price of your investments down around 20% since the first of the year, a conversion now creates much less income tax than it would otherwise. You get to convert $12,500 worth of investment you owned in January and only pay tax on $10,000 of income now.
And for those couples filing taxes jointly who report taxable income of less than $80,000, note that your federal tax rate is around 12% on an IRA conversion. With the current market correction, that makes a conversion pretty affordable. But, of course, your mileage could vary. ALWAYS consult your own tax advisor for advice on your specific situation.
For all investors. Rebalance your portfolios to be sure your allocations are in line with your goals. Be sure you have adequate cash for upcoming expenses. Revisit your long-range growth goals.
By resetting your investment holdings back to target levels, you will sell some investments at higher prices and buy more investments at lower prices. And, by dialing in to your targets, you can be more certain that your holdings are in the investment categories you thought would compliment each other best.
Looking for Some Expert Perspective?
Regular readers of this space know that I do NOT have much use for the “financial news” since most of it is more focused on exciting content that can hold eyeballs and sell advertising. Most “market insight” on TV is NOT intended to help you reach your financial goals.
But I do have a select group of experts to whom I listen.
If you would like to know what Philip Blancato, Chief Market Strategist at Advisor Group is thinking, you can find out more. To READ his most recent comments, follow this LINK. If you would prefer a podcast, follow this LINK.
Yes, there is plenty to consider. And, yes, you might benefit from the advice of an experienced, well-trained, CERTIFIED FINANCIAL PLANNER™ professional. If you would like to talk with me about your situation, I would be honored to be of service. Just follow this LINK to find a time that works for you.
To find a CFP® professional near you, start your search here.
As you visit with financial planners, I suggest a couple of things to check:
- Is the advisor always the client’s advocate – a fiduciary advisor?
- Is the advisor paid by clients, not financial product manufacturer or distribution network? That would be a fee-only advisor.
These two points help assure that you are working with a professional who is committed to your best interest at all times. It seems sort of obvious to me that a professional would work in this way, but it’s not automatic.
A fiduciary, fee-first, CFP® professional can help you make great retirement income choices and develop a comprehensive financial plan that is driven by your goals and priorities and addresses all aspects of your financial life. With a big-picture approach, you will be better prepared to understand your options at every step along the way.
Yes, I am a CFP® professional. I’m always a fiduciary and I work on a fee basis. And yes, I’m still taking on a few great families to be part of my financial planning practice.
If this article has you thinking about your own circumstances, contact my office at firstname.lastname@example.org. I am always happy to meet with people who are working on their retirement plans. Dunncreek Advisors does not provide legal or tax advice, nor is this article intended to do so.