Suspended RMDs for 2020
If you haven’t taken an RMD for 2020 yet, you don’t have to – RMDs for 2020 have been suspended, in an effort to help Americans whose retirement account balances have suffered recently. Times of market volatility are never pleasant, but they pose a particular threat to you as you near and enter retirement. The state of the market just before you retire can impact your returns throughout your entire retirement. This is because once someone takes withdrawals from a fund’s underlying investments, they expose themselves to sequence of returns risk. Suspending RMDs is one way Congress is trying to help retirees weather the coronavirus storm.
It’s important to beware of sequence of returns risk as you enter retirement because the state of the market at the time of your retirement is not within your control. Even if you’ve saved diligently your whole working life, a market downturn around the time if your retirement can have a serious negative impact on your wealth. In fact, two retirees with identical wealth and long-term market averages in retirement can have very different financial outcomes depending on the state of the economy when they begin retirement.
Someone retiring during a bear market might see their portfolio recover as the market does, but they will also see a reduction in the overall return of their portfolio because of how much they had to withdraw early on when prices were down. Withdrawing funds while your portfolio loses value can negatively affect your returns throughout retirement. If someone with a similar portfolio retires during a bull market, they can take withdrawals of fewer equities and lower their risk of causing smaller returns throughout retirement. This is because there are more equities left to generate returns later on.
Retirement shouldn’t be a time of anxiety or worry, it should be a time when you feel financially secure, and can enjoy the money you’ve worked hard to earn for decades. There are ways to protect against sequence of returns risk other than delaying your retirement. If you’ve saved and invested, you can help to protect what you’ve earned by moving away from higher risk stocks, diversifying your portfolio, and developing strategies for retirement planning in a volatile market.
As you entire retirement, beware of sequence of returns risk. Before you start withdrawing from your retirement accounts to boost your income, talk to a financial advisor about shifting to a lower-risk portfolio. We can help you create a plan that minimizes risk as you enter and live in retirement.
3 Things to Know Before Making Summer Travel Plans
The COVID-19 pandemic has resulted in many things, including canceled trips. Americans are now wondering about summer travel plans, and if it’s wise to make them before the country fully reopens. Just because everything isn’t completely back to normal yet doesn’t mean you can’t or shouldn’t take a vacation this summer – even if it means staying closer to home than you originally planned. Here are three things to know before making summer travel plans.
Can and Will You Retire in a Crisis?
Life is unpredictable, and there are a number of events that can impact our finances, from global pandemics to personal crises. And while adjustments sometimes may need to be made to get back on track, no one wants to put off an event like retirement because they feel forced to. It’s important to take stock of what you have and what you’ll need if you’re nearing or entering retirement. No rule says you must put off retirement, or that your desires are beholden to the state of the world when you reach retirement age.
3 Ways to Stay Safe As We Get Back to Normal
America is starting to reopen, but that doesn’t mean the threat of the coronavirus is gone. While we can all be thankful for looser social distancing measures, it’s still important to think about safety. Here are 3 ways to stay safe as we get back to normal.