I was recently interviewed on the Your Path Podcast; where I answered the top 9 questions that our Plan Participants sent in over the last week around their financial futures and the impacts of COVID-19.
Read below for my answers to their questions.
No. The stimulus includes cash payments to families with income less than $198,000 or individuals with income less than $99,000. This money is a grant and is meant to help families at no future cost to them.
Two main things will help the typical 401k participant. 1. If your plan has loan provisions in it, you will be able to take a loan of up to 100% of your vested balance not to exceed $100,000 and 2. There is a provision for hardship withdrawals which eliminates the 10% penalty for a time if the hardship is Coronavirus related. In addition, there is a provision that allows a participant to pay back the hardship withdrawal within 3 years.
One thing that has remained constant is the supply chain. There has been no stoppage of products to stores. The change is that individuals all at the same time felt the need to stockpile basic products like toilet paper, water, and other hygiene products. As people find they have enough in storage, we will see the shelves fill again within a very short time
Markets will struggle for the next 2-3 months and I expect they will move in a range up and down. I believe that by Summer we will see much of the losses returned but also believe the last 10-15% will take some time.
The most important thing you can do is have a financial plan. Having a plan will help you know what kind of risk you should take. In addition, you will want to make sure the risk in your investment portfolio matches your risk tolerance and age.
The investment products we use pass through a rigorous set of criteria to make sure they have both experience and a proven track record. The portfolios we create follow prudent methods ensuring a conservative portfolio remains conservative and an aggressive portfolio remains aggressive. To that end, we look weekly to see if we need to rebalance the portfolios to get back to their original mandate.
This virus is what is called a “black swan” event. It is something no one could possibly plan for. It is similar to 9/11. The only thing you can do as an individual is ensure you are not investing your money more aggressively than you can stomach. When the market is hitting new record highs, there is a temptation to invest more aggressively. As we get older and closer to retirement we each need to make sure your investments match your risk tolerance and age. Using our managed accounts program or at the least, our portfolios are one of the best ways to match your risk tolerance with an investment portfolio.
Once again, I do not believe people should try and time the market. You will be wrong more often than you will be right. A study was done on average investors doing it alone over the last 20 years. The average investor received a 1.9% return per year. However, a passive investor investing their retirement money in a balanced portfolio with 60% in the stock market and 40% in bonds, cash or other stable investments, received a 5.9% return over the last 20 years.
We will see more pain before we get better. There will definitely be more cases of the virus and more layoffs at companies, but I believe the future is a bright one. I believe completely in the American spirit. I believe we will get past this and the virus will diminish, people will go back to work, and businesses will once again reach new heights.
