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All Posts By

Zach Abraham

Jan 30
2

6 Ways to Protect Yourself From Financial Downturn

By | Financial Planning

Though the United States may avoid a full-fledged recession, it’s undoubtedly a difficult time to be a consumer. Here are some ways to protect yourself.

The fear of a recession looms large, and though it isn’t certain that we’ll enter recession territory in 2023, there’s no doubt we’re in a period of constraint for consumers. Inflation is still high despite the efforts of the Federal Reserve to cut spending with interest rate increases, and 2022 brought the worst annual performance for all three major indexes since 2008[1,2,3].

Understandably, this can cause panic among American consumers and pre-retirees, whether they have assets invested in the market or they’re simply looking to continue with their current lifestyle. With the times, however, our behavior and spending habits must change to give us the best chance to protect ourselves during periods of financial downturn. Here are some things you can do to counter volatile markets and economic declines.

  1. Cut Unnecessary Spending

One of the best ways to avoid a financial crisis is to cut unnecessary spending. That could mean more trips to the grocery store instead of your favorite restaurant, fewer luxury purchases or delaying your upcoming vacation. A properly structured and maintained budget typically accounts for all of your incoming and outgoing funds, so it can likely be a great place to start when looking for places to cut back. You may be forced to make some hard decisions, but the idea is for those decisions to pay dividends in the long run.

  1. Build an Emergency Fund

While an emergency fund might be seen as the most obvious form of protection against difficult financial times, nearly one-in-four consumers don’t have one [4]. Furthermore, 39% have less than a month’s worth of income saved in an emergency fund, and less than half would be able to cover a surprise $1,000 expense. A general recommendation is to have three to six months’ worth of expenses saved in your emergency bucket, giving you some flexibility if you’re forced to access that money. Additionally, you don’t need to make one lump sum contribution to your emergency fund. You can build it gradually, adding little by little until you have a balance you’re comfortable with.

  1. Pick Up an Extra Job

One way to supplement the difference in difficult times is to pick up an extra job to increase your total income. Though your finances often seem cut-and-dried, this is one area where you have the freedom to be a bit flexible and creative. Some ideas for an extra job include freelance or contract work, consulting, starting your own business, or even finding a part-time role at a local establishment where you already enjoy spending time, like a golf course. The possibilities are nearly endless, allowing you to have some fun with this secondary source of income. And who knows? It could lead you down a different career path that leaves you even more satisfied than your primary source of income does.

  1. Prioritize Financial Obligations

Market volatility, inflation, high interest rates, supply chain issues and other economic factors can be scary, but they’re even scarier when compounded with outstanding debt. It can always be a good idea to tackle debt to avoid falling into a situation where you’re beholden to that debt, seemingly allowing you little-to-no flexibility with your income. The sooner you enact a plan and clear that debt, the sooner you can begin building your emergency fund, making larger contributions to your retirement accounts or enjoying the perks of increased financial freedom.

  1. Look for Advantageous Investment Opportunities

While there are certainly no guarantees when it comes to investing in the market and no current iron-clad ways to dictate market performance or protect yourself from declines, opportunistic investors with a long time-horizon to retirement can take advantage of dips. Investors may be able to utilize these periods to their benefit by entering the market at a low point, or they could use a strategy called dollar cost averaging to continue investing or putting away money in their 401(k) at consistent intervals, thereby lowering their average cost per share. Though the big three indexes were down in 2022, they have a sustained history of long-term growth, potentially making declines a favorable time to enter the market.

  1. Use Protection-Based Strategies

Though growth can be enticing, sometimes protection for what you already have can be even more important. Diversifying your portfolio with a protection-based asset class, such as an annuity or a permanent life insurance policy, could be helpful through guaranteeing principal protection and index-linked growth. Despite allowing you to participate in market upside, these policies are not investments. Rather, they’re contracts with issuing insurance companies, and the guarantees are made by the claims-paying ability of those companies. These products and strategies can help you create a tax-free stream of income in retirement while protecting you from market volatility on the way there. If you think a protection-based approach may be the right strategy for you, we can help you decide based on your unique circumstances.

If you have any questions about protecting yourself from financial downturn, please give us a call. You can reach Bulwark Capital Management at 253.509.0395.

 

  1. https://www.macrotrends.net/2526/sp-500-historical-annual-returns
  2. https://www.macrotrends.net/1319/dow-jones-100-year-historical-chart
  3. https://www.macrotrends.net/1320/nasdaq-historical-chart
  4. https://www.marketwatch.com/picks/this-is-the-surprising-generation-least-likely-to-have-even-1-000-in-savings-and-heres-what-they-need-to-do-about-it-01650321688

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This article is for informational purposes only and is accurate to the best of our knowledge. It is not to be taken as investment or tax advice. in all cases we recommend that you work with financial, tax and legal professionals to find the strategies best suited to your individual situation.

 

Dec 01
1

5 Common Mistakes to Avoid with Medicare

By | Retirement

Medicare can be tricky. Here are some common mistakes to avoid!

The Medicare open enrollment period has begun, so we thought it would be a great time to discuss some of the most common mistakes retirees make when it comes to their healthcare. Along with your streams of income that you’ve created for yourself during your career, Medicare is one of your most important tools in retirement. It can protect you against medical emergencies that could be financially devastating, especially when you’re living on a fixed income.

It is, however, important to know that Medicare has its limitations, potentially making you susceptible to mistakes when signing up and choosing a plan. Far too often we visit with and hear about retirees who aren’t aware of how Medicare works or how to correctly utilize it as a tool for protection. We believe that many of the headaches could be avoided simply by knowing the obstacles that may present themselves along the way, thereby allowing you to prepare for what’s ahead. Let’s go over the five most common Medicare mistakes, as well as a few ways to avoid them.

  1. Not Understanding What It Is

In 2021, two-thirds of Americans were covered by a private insurance plan, meaning that they were either part of a group plan through their employer, or they sought out coverage from an insurance company on their own [1]. While private insurance plans may differ on a case-by-case basis, they generally function similarly with premiums, deductibles and various amounts of coverage in each plan. In comparison with the healthcare insurance you may have had during your career, Medicare has slight yet key differences.

For example, Medicare has four parts: A, B, C and D. Parts A and B are usually referred to as Original Medicare, with Part A covering visits to hospitals and skilled nursing facilities as well as hospice care and some home-based healthcare. It is free for those who qualify, which includes those age 65 and older who have contributed Medicare taxes for 10 years or longer.

There are, however, monthly premiums for Part B, the portion of Medicare that covers the cost of outpatient care, such as standard visits to a general practitioner.

Parts C and D can be a bit trickier for those first signing up for Medicare. Part C is commonly known as a Medicare Advantage or Medigap plan, and these plans generally replace Parts A and B (and often Part D) with a plan through a private insurance company which gets subsidized by the government. Part C Medicare Advantage or Medigap plans can also include extra coverage like dental, vision and hearing.

Part D is prescription drug coverage, which is not included in Original Medicare Parts A and B but can be added for an additional premium amount.

No matter which plans you choose, Medicare premiums typically come directly out of your Social Security benefit, and it is important to account for those deductions when figuring your Social Security benefit into your net income.

  1. Overestimating Its Capabilities

As we mentioned above, Part A of Medicare is free to those who qualify, potentially generating the common misconception that Medicare as a whole is free for those in retirement. In reality, only premiums for Part A come at no cost to the insured, which still doesn’t include 2023’s $1,600 deductible for hospital visits [2]. Part B comes with a standard monthly premium which will be $164.90 per month in 2023. Increasing and enhancing your coverage with a Medicare Advantage plan can also hike your rates, and the cost of Part D can increase with a penalty for missing your initial enrollment period.

When planning your retirement, it’s important to know that those with higher incomes pay more for Medicare, and there is a two-year look-back on your income per your tax returns when determining how much you will pay.

It’s also important to know that Medicare does not cover long-term care. While no one likes to think about the prospect of leaving their home, their possessions and their loved ones behind, 70% of today’s retirees will need some type of long-term care, and 20% will need it for longer than five years [3]. When the national annual median cost of a private room in a nursing home can top $100,000[4], it’s easy to see where the problem lies. It may be helpful to look elsewhere for long-term care coverage, including into a long-term care insurance policy or a life insurance hybrid policy that includes assistance to pay for long-term care if you need it or a death benefit for your beneficiaries if you don’t.

  1. Signing Up Outside the Initial Enrollment Period

You are not automatically enrolled when you qualify for Medicare at age 65, you must enroll yourself. There is a seven-month enrollment window which starts from the three months before your 65th birthday, the month of your 65th birthday and the three months following your 65th birthday.

Failure to enroll during that period could cause you to incur permanent surcharges.

For instance, with Part D prescription drug coverage, you may incur a penalty. That penalty is calculated by taking 1% of the “national base beneficiary premium,” which is $32.74 in 2023[5], and multiplying it by the total number of full months you’ve gone beyond your initial enrollment period. For example, with next year’s national base beneficiary premium, if you delayed enrollment for Part D by 12 months, your premium would be an additional $3.93 per month.

  1. Picking the Wrong Plan

In the same way that your healthcare plan during your career probably had limited coverage, Medicare Advantage plans and Medicare Part D plans cover different providers and prescription drugs [6].

That’s why when you’re considering Medicare options, it’s important to have a list of your doctors and medications in hand. Consider working with a Medicare specialist who can help you choose between multiple carriers rather than going it alone.

  1. Neglecting to Revisit the Plan During the Open Enrollment Period

Medicare open enrollment runs annually from Oct. 15 through Dec. 7, so now is the perfect time to review your options. And remember, as you get older, your needs will likely change. You may move. You may begin to see different specialists or healthcare providers. Almost certainly, your need for different prescription drugs will change. As those needs change, so can your Medicare plan.

The open enrollment period gives Medicare beneficiaries a plethora of options in changing their coverage to tailor it to their unique circumstances. For example, you can opt to change your Original Medicare plan to a Medicare Advantage plan, or vice versa. Furthermore, you can change your Medicare Advantage plan to a different one that offers more complete coverage for your care. Finally, it gives you the ability to customize your Part D coverage, whether you’re adding it to your current plan, removing it from your plan or changing it to accommodate your needs [7].

Too often, Medicare beneficiaries have improper coverage, leaving them scrambling to pay for their care. You can revisit your plan each year during the open enrollment period to help ensure that you aren’t stuck with medical bills you could have avoided.

If you have any questions about retirement issues like Medicare, please give us a call! You can reach Bulwark Capital Management at 253.509.0395.

Sources:

  1. https://www.cdc.gov/nchs/data/nhis/earlyrelease/insur202205.pdf
  2. https://www.cms.gov/newsroom/fact-sheets/2023-medicare-parts-b-premiums-and-deductibles-2023-medicare-part-d-income-related-monthly
  3. https://acl.gov/ltc/basic-needs/how-much-care-will-you-need
  4. https://health.usnews.com/best-nursing-homes/articles/how-to-pay-for-nursing-home-costs
  5. https://www.medicare.gov/drug-coverage-part-d/costs-for-medicare-drug-coverage/part-d-late-enrollment-penalty
  6. https://www.aarp.org/health/medicare-insurance/info-2019/common-medicare-mistakes.html
  7. https://www.investopedia.com/medicare-open-enrollment-guide-5205470#toc-what-can-you-change-during-medicare-open-enrollment

 

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Investment Advisory Services offered through Trek Financial LLC., an (SEC) Registered Investment Advisor.

Information presented is for educational purposes only. It should not be considered specific investment advice, does not take into consideration your specific situation, and does not intend to make an offer or solicitation for the sale or purchase of any securities or investment strategies. Investments involve risk and are not guaranteed, and past performance is no guarantee of future results. For specific tax advice on any strategy, consult with a qualified tax professional before implementing any strategy discussed herein.

Oct 25
0

The Importance of Having an Estate Plan

By | Estate Planning

A proper estate plan can protect your assets and your family. Here are some answers to questions you may have!

October is National Estate Planning Awareness Month, so now is the perfect time to discuss the importance of having an estate plan. We get it. It’s something nobody wants to think about, especially your loved ones, who can’t imagine living without you. But estate planning is a necessary part of the financial planning process. It helps ensure that everything you’ve worked so hard to accumulate gets passed on according to your desires in the most tax-advantaged manner possible.

Moreover, no financial plan is truly complete without an estate plan. The ideal financial plan preserves and protects your assets throughout your life all the way through your retirement, helping ensure that you don’t outlive your resources, but it also accounts for your legacy and wealth transfer at the end of your life. Without an estate plan, your assets, whether that be money, real estate, possessions or even precious family heirlooms, could end up in the wrong hands.

Let’s go over some commonly asked questions to make the estate planning process more understandable and easier to approach.

What is an estate plan?

An estate plan is a detailed, documented plan for what will happen to your assets when you’re gone. It’s intended to ease the transition following death by directing the transfer of your things. The most commonly known document in an estate plan is your last will and testament, which specifically lists and designates all of your assets to your beneficiaries. It also names an executor who is in charge of making sure the beneficiaries listed in the last will and testament receive what they are entitled to and that all of your final affairs and financial matters are settled. In the case of minor children, your last will and testament also specifies who you wish to raise your children in the event that both you and your spouse have passed away.

Additionally, an estate plan can contain other documents like trusts, health care directives or living wills, and powers of attorney. Your comprehensive estate plan is essentially a plan for the worst, should you be unresponsive, unable to make a decision or deceased [1].

Why is it important for me to have one?

There are many reasons to have an estate plan, the most important of which likely being the bequeathing of your assets to specific beneficiaries. Without proper documentation, the best-case scenario sees the correct distribution left up to chance, the courts and your heirs. The worst-case scenario means all-out war inside your surviving family.

An estate plan can also save your family from unnecessary tax burden. Oftentimes estate plans and financial plans come together to determine the most tax-efficient distribution of your property and accounts. You’ve worked so hard your entire life, both for your family and for yourself. Chances are, you’d love to see that money in the hands of those you love rather than in the pockets of the IRS [2].

Aren’t estate plans only for the ultra-rich?

A common misconception is that estate plans are exclusively for those with multiple million-dollar estates, priceless artwork or valuable shares in major companies. But that just isn’t true. In fact, those with fewer assets may have an even greater need for tax-efficient estate planning so that their families are protected during a potentially financially devastating time.

But even the rich are often unprepared. The unfortunate truth is that 67% of Americans don’t have an estate plan [3], but anyone with a family or assets should plan for the future, whether you’re handing down the majority stake in a large corporation, a vacation home or the remaining balances of your retirement accounts.

No matter the amount of assets, an estate plan can save your family headaches, time and tears by predetermining ownership before they are thrust into one of the most stressful endeavors of their lives. It’s worth it to strategize in life so that when your time comes, your family can spend their time properly grieving instead of worrying—or fighting—about how to split your belongings.

Things will sort themselves out, even if I don’t have a plan, right?

Well, technically, yes. Things will sort themselves out. But you’ve spent your entire life in the driver’s seat, making decisions that matter for you and your family. If you pass away without an estate plan and legal documents, small decisions are left to your extremely emotional family, and major decisions are left to probate court in what is usually a very costly and lengthy process.

In distributing your assets, courts can often be more expensive and time-consuming than need be. Tack on the fact that the legal system doesn’t understand your family’s history or dynamic, and it becomes a recipe for trouble. As someone who does understand how your family operates, which members deserve which assets and which members are able to be responsible for what they inherit, you can simplify the process by organizing an estate plan while still alive and sound of mind.

How do I start the conversation?

Determining how your family proceeds when you’re gone is no easy task. It can be just as difficult, or maybe even more difficult, for your children who have never been forced to live without you and the support you offer.

In our experience, we’ve found that the earlier the conversation begins, the easier it is to have. It’s always simpler to plan out of luxury than necessity, and estate planning is no different.

Communication is key. Talk to your heirs and loved ones about what your desires are, and ask them about theirs. You may be surprised to find out that it’s the sentimental items they want rather than the expensive ones. By having a clear plan that’s communicated well beforehand, years prior to any eventuality, you can avoid permanent family rifts and resentments later.

How can I get started with my estate plan?

Once you’ve consulted your heirs, or your parents if you are the heir, it’s important to accept that you’ll need help to complete a legally-recognized estate plan.

Ideally, your financial professional and your estate attorney should work together. Your financial professional can bring an estate planning attorney to the table, or work in conjunction with yours. What the financial professional does is find tax-advantaged vehicles and efficient ways to transfer wealth that an attorney may not know about or have access to, while the attorney brings the legal expertise, knowledge of state laws, and ability to generate all the needed legal documents.

Remember that it’s equally important to revisit and review your estate plan periodically, preferably every year. Life continually evolves as you acquire new assets and your family grows and changes.

If you have any questions about your estate plan, please give us a call! You can reach Bulwark Capital Management at 253.509.0395.

 

Sources:

  1. https://www.businessinsider.com/personal-finance/what-is-estate-planning#what-are-the-main-steps-in-estate-planning
  2. https://www.investopedia.com/articles/wealth-management/122915/4-reasons-estate-planning-so-important.asp
  3. https://www.cnbc.com/2022/04/11/67percent-of-americans-have-no-estate-plan-heres-how-to-get-started-on-one.html

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Investment Advisory Services offered through Trek Financial LLC., an (SEC) Registered Investment Advisor.

Information presented is for educational purposes only. It should not be considered specific investment advice, does not take into consideration your specific situation, and does not intend to make an offer or solicitation for the sale or purchase of any securities or investment strategies. Investments involve risk and are not guaranteed, and past performance is no guarantee of future results. For specific tax advice on any strategy, consult with a qualified tax professional before implementing any strategy discussed herein.

Sep 20
2

4 Recent Innovations in Life Insurance Policies

By | Risk Management

Life insurance is no longer constrained to the inflexible policies our parents held. Here are some of the latest additions and innovations to give you more options than ever.

Today’s life insurance policies are not the policies our parents and grandparents grew up with and purchased. They offer more features and more customization, at a price lower than many consumers expect to pay.

In fact, a recent study showed that more than 50% of people assume that the cost of life insurance is three times higher than it actually is [1]. Furthermore, 44% of millennials, a group whose net worth continues to rise more rapidly than any other generation [2], overestimate the cost of term life insurance by more than six times.

Price, however, isn’t the only barrier holding people back from looking at what life insurance has to offer. Lack of information, explanation and time to research options, combined with the fact that no one enjoys thinking about and planning ahead for their own death, can make life insurance a tough subject.

New life insurance policy features are designed to quell those worries, as insurance companies look for more ways to build client-oriented policies. Here are some of the latest innovations in the life insurance industry:

  1. Cash Value Component and Living Benefits

Life insurance used to be exactly what it might sound like: insurance for your life. In the event of their unexpected death, policyholders wanted to protect their families, usually by purchasing term life insurance. Term life insurance covers policyholders for a predetermined period of time, typically for a low monthly rate.

Now, carriers offer whole and universal life insurance, which are permanent policies with a tax-deferred cash value component that allows retirement planners to create another avenue to build a nest egg, or savers to save for other things, like college or self-funding a business startup venture. Though the cash value component often increases the monthly premium costs, with these types of policies, the cash value can grow at a rate guaranteed by the claims-paying ability of the insurance company.

One advantage of universal life as opposed to whole life is flexible premiums, allowing you to increase or decrease your premium and the amount that goes toward your cash value. Indexed universal life, a type of universal life insurance, can offer principal protection with market upside potential in correlation with a market index or indexes. (It’s important to understand that indexed universal life is a contract between a consumer and an insurance company, and unlike variable life insurance, isn’t actually subject to stock market risk.)

Permanent life insurance policies that can build cash value can be a good option for healthy younger investors with time and low likelihood of death in the near future. Depending on their situation, healthy retirees can also sometimes benefit from single-premium permanent life insurance which can provide tax-advantaged retirement income.

  1. Long-Term Care Hybrid Policies

Just as no one enjoys planning for their own death, no one likes to imagine needing long-term care. Unfortunately, 70% of people currently age 65 or older in America will need long-term care, with 20% needing support for longer than five years [3}. Additionally, Medicare does not cover long-term care, necessitating some sort of plan to pay for long-term care to avoid the accelerated depletion of funds in retirement.

One solution to the problem is a modern life insurance and long-term care hybrid plan. Obviously, the main sticking point and fear when it came to traditional long-term care insurance was the potential for not needing long-term care, and that fear was completely rational and well-founded. Older policies were “use-it-or-lose-it.” If you didn’t end up needing long-term care, all of those premiums you paid through the years were for nothing.

Now, hybrid policies provide flexibility. Policyholders have the ability to use their benefit to fund long-term care if they need it. If they don’t need it, it becomes a death benefit provided to their beneficiaries.

  1. Riders

One of the biggest expansions in life insurance is in the way you can customize a policy to your needs using a wide array of options available as riders that can be added to an insurance policy. A guaranteed insurability rider, for example, allows the policyholder to purchase more coverage without additional medical examination. It can be helpful to have a guaranteed insurability rider if you expect changes in circumstances that would have affected your original premiums.

Accidental death riders are also common, usually doubling the death benefit in the event that the policyholder dies in an accident. Additionally, accelerated death benefit riders can give the policyholder access to the death benefit if diagnosed with a terminal illness [4]. The amount accessed is typically subtracted from the death benefit, meaning that the policyholder’s beneficiaries receive a smaller death benefit, but it’s yet another example of a feature allowing access to funds during life.

  1. Better Support for Policyholders

Whether it be because of life insurance riders or enhanced operations, life insurance does not have to be difficult to obtain. Modern technology, increased access to better medical information and simplified underwriting have helped innovative companies that are always looking for ways to reach broader audiences with better products.

With an independent financial advisor who works with multiple insurance companies, you can find the insurance policy that suits your own unique situation and budget, with the most beneficial features and/or riders for your needs.

If you have any questions about life insurance and the latest advancements, please give us a call! You can reach Bulwark Capital Management at 253.509.0395.

 

Sources:

  1. https://lifehappens.org/research/life-insurance-is-on-peoples-minds/
  2. https://www.cerulli.com/press-releases/millennials-want-more-advice-and-are-willing-to-pay-for-it
  3. https://www.annuity.org/retirement/planning/average-retirement-income/
  4. https://www.investopedia.com/articles/pf/07/life_insurance_rider.asp

 

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Aug 12
1

What is COLA, and How Does it Affect Retirement?

By | Retirement, Social Security

The COLA on Social Security is projected to increase benefits by more than 10%. How does that affect your retirement?

Inflation in the United States is at a 40-year high, and the entire country seems to be feeling the squeeze of rising prices, regardless of income level. Though the debate over the cause of current inflation rates rages on, one thing seems to be certain: the cost of everyday goods, like rent, gas and food, continues to rise [1].

Understandably, that leaves American consumers with questions and concerns. First, as the value of the dollar decreases, which lifestyle adjustments can be made to compensate for the loss in buying power? Second, won’t somebody do something?

This year, the Federal Reserve has taken action by raising interest rates several times in an effort to curb spending and cut demand, ideally forcing the price of goods down, or at the very least, leading them to stagnate [2]. But lately, the Fed has been criticized by experts worried that their actions may not be having the desired effect, but instead may be bringing on a recession [3].

So, what other actions does the government take to protect people from inflation? For retirees and those collecting Social Security benefits, the Social Security Administration began implementing an annual COLA almost five decades ago.

What is a COLA?

No, it’s not the tasty drink you order when you first sit down at a restaurant. COLA stands for “cost-of-living adjustment” and was first introduced by the Social Security Administration in 1975 in an effort to counter inflation for beneficiaries relying on those funds [4]. Beneficiaries of Social Security, which include individuals who have reached the age of 62 or have qualifying disabilities, can receive an increase in their benefit based on the Department of Labor’s Consumer Price Index for Urban Wage Earners and Clerical Workers, or the CPI-W.

For example, at the beginning of this year, Social Security beneficiaries may have noticed their checks increasing by 5.9%. That increase didn’t happen by chance or because of a missed decimal point in the accounting department. It was a carefully constructed adjustment based on 2021’s inflation rate, ideally giving those living on fixed income a chance against rising costs.

And next year’s COLA for 2023 could be the highest we’ve seen since 1981.

How does this affect retirees?

Retiring isn’t easy, and there’s a reason workers open IRAs and employer-sponsored retirement accounts, like 401(k)s, early in their careers to begin building for the future. Retirement comes with a great deal of financial risk, and one of the biggest contributors to that risk is inflation.

Retirees often live on fixed incomes, withdrawing money from savings accounts, retirement accounts, pensions, annuities, investments and Social Security to cover their living expenses. Though a proper financial plan accounts for inflation, it can be difficult to foresee spikes like the one in 2022, potentially upsetting expectations of how long your money will last. Though imperfect, the COLA can offer retirees increases to one of their main sources of income in retirement, hopefully offsetting change that can occur over the course of decades.

What is the next COLA expected to be, and when can I expect it?

A recent COLA projection made headlines with an eye-popping number. The Senior Citizens League estimates that Social Security beneficiaries could see a 10.5% COLA, meaning that the average monthly benefit could increase by about $175[5].

That estimate has steadily climbed over the past few months, though it’s certainly not yet set in stone. The Social Security Administration will announce the next COLA in October, and it will go into effect in January of 2023.

Are there any problems with COLA?

Though an increase in your Social Security check might sound entirely positive, there are drawbacks to COLA and the problems it aims to correct. The COLA is intended to cover the difference between the current cost of living and the previous year’s cost of living, but it is possible that the extra money in your benefit will only partly cover your increased living expenses.

The COLA is not directly aligned with inflation, so it is possible for inflation to rise faster than Social Security’s adjustment. For example, in 2021, inflation climbed 7% [6] while the COLA only increased by 5.9% [7]. Similarly, the Social Security COLA can remain unchanged year over year, just as it did following 2009, 2010 and 2015 when inflation rose 2.7%, 1.5% and 0.7%, respectively [8].

While not completely reflective of each other, the COLA and inflation do correlate, and inflation is currently outpacing wages. In fact, in 2021, wages actually saw a 3.5% drop when living costs are accounted for [9]. Though this doesn’t directly affect Social Security beneficiaries, the Social Security trust funds are built by contributions from income taxes [10]. It stands to reason that inflation’s outpacing of wages would mean that the Social Security trust funds, which currently project to only be able to pay at their current rate until 2035, would deplete even quicker [11].

So, as someone who collects Social Security or hopes to in the future, what can I do?

First and foremost, we would always recommend speaking with your financial professional to assemble a proper plan for your retirement. The right financial plan can be the difference between having adequate funds for your desired lifestyle or running out of money. Social Security is only one income stream, and backup plans with alternative sources of funds are vital.

If you have any questions about your Social Security benefit, please give us a call! You can reach Bulwark Capital Management at 253.509.0395.

Sources:

  1. https://www.marketwatch.com/story/coming-up-consumer-price-index-for-may-11654862886
  2. https://www.forbes.com/advisor/investing/another-75-point-fed-rate-increase/
  3. https://www.forbes.com/sites/jonathanponciano/2022/07/27/fed-raises-interest-rates-by-75-basis-points-again-as-investors-brace-for-recession/
  4. https://www.ssa.gov/oact/cola/colasummary.html
  5. https://www.cnbc.com/2022/07/13/social-security-cost-of-living-adjustment-could-be-10point5percent-in-2023.html
  6. https://www.cnbc.com/2022/01/12/cpi-december-2021-.html
  7. https://www.ssa.gov/oact/cola/colaseries.html
  8. https://www.thebalance.com/u-s-inflation-rate-history-by-year-and-forecast-3306093
  9. https://www.cnn.com/2022/07/29/economy/worker-wages-inflation/index.html
  10. https://www.ssa.gov/news/press/factsheets/WhatAreTheTrust.htm
  11. https://www.thestreet.com/investing/social-security-2035

 

Investment Advisory Services offered through Trek Financial LLC., an (SEC) Registered Investment Advisor.

Information presented is for educational purposes only. It should not be considered specific investment advice, does not take into consideration your specific situation, and does not intend to make an offer or solicitation for the sale or purchase of any securities or investment strategies. Investments involve risk and are not guaranteed, and past performance is no guarantee of future results. For specific tax advice on any strategy, consult with a qualified tax professional before implementing any strategy discussed herein. Trek 348

Jul 20
0

Inflation as a Risk in Retirement

By | Inflation Risk, Retirement

Inflation can be troubling, especially for those living on a fixed income. Here’s what you need to consider.

Exiting the work force and beginning the next chapter of your life can be infinitely exciting. After a long career, free time afforded by retirement offers a great opportunity to check off long-awaited bucket list items or develop those relationships with loved ones. You might also stop setting alarms in the morning, making sure that you get the right amount of sleep to propel you toward your dreams. There is, however, one area in which you might not want to hit the snooze button: your finances.

With improvements in science and medicine have come increases in life expectancy, extending the length of retirement for the modern worker. While it’s great to plan to be around longer to pursue passions and spend time with family, longer life expectancy does present a challenge. Retirees used to plan for 10 to 15 years of retirement, but it’s no longer strange for someone to live to 100, meaning that retirement could potentially last 30 years [1].

Prolonged retirement can bring about longevity risk, which is the risk of running out of money while still alive, and inflation provides zero relief when it comes to making your money last. Inflation decreases the purchasing power of the dollar, which can create a serious problem for retirees living on fixed incomes and retirement accounts they’ve built over the course of their careers. Now inflation is at a 40-year peak [2], which can cause headaches, especially for those entering retirement as they’re forced to deplete savings faster than they might have under lower inflation rates.

Luckily, there are a few ways to alleviate some of the pain points when it comes to inflation in retirement. First, it can be beneficial to contribute to your retirement accounts early in your career. You can begin planning for retirement too late, but you can never begin too early. Some investment vehicles designed to build retirement assets for your future include employer-sponsored 401(k) plans, 403(b) plans, traditional IRAs, Roth IRAs, SIMPLE IRAs and SEP plans.

Traditional 401(k) and IRA accounts grow tax-deferred, meaning that contributions will be made before taxes are taken from your paycheck then are taxed upon distribution. Roth accounts are distributed and grow tax-free if all IRS regulations are followed, but initial contributions are made with post-tax dollars. Both grow with compound interest; which Albert Einstein called the eighth wonder of the world. Compound interest means you will accrue more interest through time based on your growing account balance, so taking the time to feed those accounts when you’re younger can be extremely rewarding.

If you are getting close to retirement and don’t have decades of time on your side, there are a few more things about inflation that you should know.

Social Security considers inflation annually when calculating benefits, and some years it provides a cost-of-living adjustment, or COLA, based on one of the federal government’s consumer price indexes called the CPI-W. In 2021, Social Security beneficiaries received a 5.9% COLA, which was the highest increase since 1982, but it’s important to remember that COLA may not always cover increased costs. For example, beneficiaries received no increase in 2015[3] despite an incremental 0.12% inflation rate [4].

Some annuities are also specifically designed to combat inflation by offering a COLA. Annuities are contracts between buyers and issuing insurance companies which guarantee annuity payments based on the insurance carrier’s claims-paying ability [5] as well as the terms of the contract. With annuities that offer a COLA, the pre-determined payments may be adjusted to account for inflation.

Lastly, it’s always important to consult your financial professional to find solutions to suit your unique, individual situation. The proper guidance can assist you in determining whether or not you’re placing enough money into various retirement accounts to account for future inflation without disrupting your desired lifestyle.

If you have any questions about how inflation may affect your retirement, please give us a call! You can reach Bulwark Capital Management at 253.509.0395.

 

Sources

  1. https://money.usnews.com/money/retirement/articles/how-living-longer-will-impact-your-retirement
  2. https://apnews.com/article/key-inflation-report-highest-level-in-four-decades-c0248c5b5705cd1523d3dab3771983b4
  3. https://www.ssa.gov/oact/cola/colaseries.html
  4. https://www.worlddata.info/america/usa/inflation-rates.php
  5. https://www.investopedia.com/terms/l/lifetime-payout-annuity.asp
Jun 14
0
Annuities

How Annuities Offer Protection and Growth Potential

By | Financial Literacy, Retirement

National Annuity Awareness Month is upon us! Let’s go over how annuities can be an important part of a retirement plan.

June is National Annuity Awareness Month, giving us the perfect reason to discuss how they can positively impact your retirement. Annuities have always played a role in retirement planning, but with growing uncertainty and market volatility, their importance has boomed. They offer the chance for growth along with the protection of principal during market downturns which is guaranteed by the claims-paying ability of the issuing insurance carrier.

While they can be a vital part of the retirement-planning process, annuities can sometimes be overlooked by advisors who focus strictly on accumulation and stock market investments. For people getting close to retirement and those without the appetite or flexibility for stock market risk, annuities can be an attractive option to guarantee income for life.

In fact, annuities were created for retirement; they were first invented during ancient Roman times to compensate retired soldiers. They’re meant to help you generate income once you stop collecting wages. There are many different types of annuities, but fixed and fixed indexed annuities are different than retirement accounts like 401(k)s and IRAs in that they are not subject to market risk, and they offer guarantees.

In other words, fixed and fixed indexed annuities can offer a guaranteed income stream to eliminate some of the uncertainty that comes with retiring. It’s important to understand fixed and fixed indexed annuities are not investments, they are contracts. Even though they may credit interest based on market gains, they are not actually invested in the market at all. Fixed and fixed indexed annuities are contracts between you and the issuing insurance company, who again, based on their claims-paying ability, guarantee your principal and sometimes offer participation in stock market upside.

One of the main concerns of Americans on their way into their golden years is funding a secure retirement. In fact, a recent study showed that 56% were worried about running out of money in the next stage of their lives [1]. That worry seems to be well-founded, as a 2019 study projected that over 40% of U.S. households will run out of money in retirement [2].

One of the biggest reasons retirees run out of money is sequence of returns risk. This can happen when clients withdraw money from accounts early in retirement in a down market. The withdrawals can then out-pace the growth of the account, making it more likely that a person completely drains their funds while still living.

A fixed indexed annuity can counter sequence of returns risk by providing a guaranteed lifetime income option. Under a properly-structured fixed indexed annuity, the principal and the lifetime income benefit are both protected, which can be beneficial in a market crash. They also offer flexibility in diversifying your portfolio, as retirees with a guaranteed lifetime income benefit can keep other assets invested in the market, conceivably giving them a chance to wait out valleys and plateaus.

Some annuities are even designed to help combat inflation by offering a COLA, or cost of living adjustment. Considering the 2021 inflation rate was the highest America has seen since 1981[3], it’s no wonder experts are expecting an increase in inflation-protected annuities [4].

While annuities are popular among those looking for protection as well as growth potential, purchasing one can be treacherous without proper help. There are many different types of annuities, and they won’t all offer identical benefits or protections. For example, variable annuities are directly invested in the market and carry the same risk that any market investment would. There are pros and cons to each type, and innovative insurance companies are working to design new annuity products with enhanced benefits every single day.

If you have any questions about annuities or how to protect your retirement funds, please give us a call! You can reach Bulwark Capital Management at 253.509.0395.

Sources:

  1. https://www.nirsonline.org/wp-content/uploads/2021/02/FINAL-Retirement-Insecurity-2021-.pdf
  2. https://www.ebri.org/content/retirement-savings-shortfalls-evidence-from-ebri-s-2019-retirement-security-projection-model
  3. https://www.thebalance.com/u-s-inflation-rate-history-by-year-and-forecast-3306093
  4. https://ifamagazine.com/article/inflation-could-lead-to-a-resurgence-in-popularity-of-annuities-says-continuum/

 

May 11
0

4 Tips to Save For and Fund Your Child’s College Tuition

By | Financial Planning

College is an investment in your child and your family, but it can come at a hefty price. Here are some tips to save!

 

College and other forms of higher education have always been a vital part of planning a career. The foundation of any resume, a recent study interviewing 500 professional recruiters showed that all 500 look for candidates with a college degree [1]. Some common rebuttals to the argument for college might start with names like Zuckerberg, Jobs, Gates and Oprah Winfrey, all who dropped out school. Those four have incredible stories, but they’re the exception, not the rule.

The average college graduate with a bachelor’s degree has a lifetime earnings of $2.8 million while a person who achieved a high school diploma earns an average of $1.6 million over their career[2]. At the same time, that average increase in lifetime earnings can come at a steep price, and that price is only rising. Tuition has climbed 211% for in-state universities over the last 20 years [3], escalating panic in students and their families who are forced to shoulder the burden. Without a plan to tackle them, loans can hang over a student’s head for decades. To alleviate some of that stress, here are a few tips for saving for and funding your child’s college education:

  1. Assess early options

Many high schools around the United States offer Advanced Placement (AP) and dual-enrollment classes. By taking these higher-level courses while still in high school, students can be awarded college credits early, potentially at an even lower cost. AP classes are generally more difficult classes targeting more specific areas of study within a subject. They’re widely accepted and acknowledged throughout U.S. colleges, and they are free to students who elect to take the challenge. End-of-year tests for AP classes do cost $96 per exam [4] in the U.S., but colleges may award credits based on scores that would be evident of the student mastering the material.

Dual-enrollment classes, on the other hand, function as a partnership between high schools and colleges. A dual-enrollment class holds high school students to the college-level standard and curriculum. The students then pay per credit at the partnered college’s rate and receive those credits upon class completion as if they were taking those courses on the college campus. Both types of classes can save students and parents valuable time and money in their pursuit of higher education.

  1. Familiarize yourself with the aid process

There are many types of student aid, and amounts can vary based on a plethora of factors. The most obvious form of assistance provided to students is scholarship money. It can be awarded based on test scores, academic results, athletics or extracurricular activities, and amounts can fluctuate based on a student’s choice of school. There are also opportunities for privately-funded scholarships that can be awarded by foundations, religious groups or other organizations on a need or merit-based basis. Students can typically find these opportunities online and apply if they meet predetermined criteria.

Students should also fill out the Free Application for Federal Student Aid, otherwise known as the FAFSA [5]. The FAFSA uses a student’s information to determine how much aid they might qualify for, including money from grants or state-funded assistance. It can also determine how much a student could qualify for in loans if those become necessary.

  1. Familiarize yourself with current legislation

Legislation is always changing for parents looking to get a jump-start in funding their child’s education. For example, the FAFSA Simplification Act of 2020 opened new doors for students trying to qualify for need-based assistance. Prior to the FAFSA Simplification Act of 2020, the FAFSA calculated the expected family contribution, or the EFC. The EFC estimated the amount family members would be able to contribute to a student’s education based on income, assets and other benefits. EFC has now been replaced by student aid index, or SAI. Where EFC bottomed out at $0, SAI can go as low as -$1,500, meaning students can qualify for more need-based aid [6]. SAI also simplifies the form itself, cutting down the number of questions and the factors that figure into assistance a student might receive from family.

Where this could truly be a boon to students who need more aid is through family members whose contributions were accounted for in the EFC but are not accounted for in the SAI. The popular 529 plan, which provides tax-advantaged savings for designated beneficiaries, is often used by grandparents to help their grandchildren pay for college. Funds from a 529 plan no longer factor into the expected contributions from family members meaning that they will not have negative implications for the FAFSA’s estimation of how much aid a student requires [7].

  1. Research schools prior to selection

Cost can differ by school selection, and though some students have their hearts set on a specific university, financials could play a large role in deciding on the best fit for your child. For example, students who do not expect to receive much aid from family or scholarship opportunities can opt for community college. Community colleges generally offer favorable per-credit prices for in-state students. The average cost per credit hour at a two-year community college is $141 while a public, four-year university costs $390 per credit hour on average [8].

After two years at a community college, students can usually transfer their credits to a university to finish a four-year degree. Wide-ranging opinions also exist about college selection [9]. Some researchers and surveys suggest that attending a prestigious college could be nothing more than a status symbol. Employers can look for many qualifications such as experience, extracurriculars, ability or the simple fact that a candidate attended any college. At the end of the day, the right choice of school will be different for each student.

If you have any questions about saving or planning to help your family, please give us a call! You can reach Bulwark Capital Management at 253.509.0395.

 

Trek 284

 

Sources:

  1. https://www.ellucian.com/assets/en/white-paper/credential-clout-survey.pdf
  2. https://www.forbes.com/sites/michaeltnietzel/2021/10/11/new-study-college-degree-carries-big-earnings-premium-but-other-factors-matter-too/?sh=6fd5ad4035cd
  3. https://www.usnews.com/education/best-colleges/paying-for-college/articles/2017-09-20/see-20-years-of-tuition-growth-at-national-universities
  4. https://apcentral.collegeboard.org/exam-administration-ordering-scores/ordering-fees/ordering-exam-materials/help/cost-of-exam
  5. https://studentaid.gov/
  6. https://unicreds.com/blog/student-aid-index
  7. https://www.usnews.com/education/best-colleges/paying-for-college/articles/tips-for-grandparents-using-a-529-plan-to-save-for-college
  8. https://educationdata.org/cost-of-a-college-class-or-credit-hour
  9. https://www.nbcnews.com/business/business-news/does-it-even-matter-where-you-go-college-here-s-n982851
Apr 19
2

7 Tips for Saving Money at the Pump

By | Financial Planning, Inflation Risk

Gas prices are on the rise. Here are some ways to save a little bit of money.

The surge in gas prices swooped in just in time to dampen the mood in 2022. With the Russian invasion of Ukraine continuing to impact oil prices all around the world, the best solution might be to embrace the climb and start brainstorming some small life changes we can make to compensate.

According to AAA, the United States hit its highest average price per gallon Mar. 11 at $4.33 [1]. By adjusting, it’s possible to save hundreds, or even thousands, each month [2], and that money could go right back into your pocket. Fewer trips to the pump mean more money in your wallet, which means more money that you can spend, save or invest in your future. Here are seven tips to save money on gas as the prices rise:

  1. Use public transportation

This option might depend upon your geographic location and living situation, but you may be able to save on gas by taking public transportation. It may not be an option in widely-sprawling metro areas or cities without public transportation systems, but in major cities like New York, San Francisco, Boston, Philadelphia or Seattle, one household could save $10,000 or more each year by opting to use public transit [2]. That total could depend upon other factors, like the type of car you drive, insurance and parking, but gas and rising prices certainly figure into your possible savings.

  1. Start carpooling

For those who have longer work commutes or don’t live in cities with public transit systems, carpooling can be a great option. By finding a work friend who lives nearby and makes a similar commute, you might be able to cut your gas expenditure in half. Those savings can multiply if you decide to invite more people into your car pool, and it might even be a great option for those looking for more social outlets. Carpooling can also help the environment by reducing emissions, and it saves you time by cutting traffic and giving you access to the glorious high occupancy vehicle lane.

  1. Download price-viewing apps

Gas prices fluctuate based on location and company. Don’t you hate it when you get gas, then drive one mile down the road and see prices 30 cents cheaper than the price you just paid? Luckily, there is an easy fix for that problem. Phone apps, like GasBuddy [3], list prices for nearly every filling station in your immediate area. Users update the information to ensure that the prices you see are accurate, and you can pinpoint the cheapest gas with just a few taps. Simply checking nearby gas prices or rates in a specific city or zip code is free, but GasBuddy also offers premium, fee-based options that can help users rack up even more savings.

  1. Become a member of wholesale stores

Wholesale stores, like Costco, may feature lower gas prices depending on your area. Granted, a membership to Costco might cost you $60 annually [4], but we can do some quick math to see just how that membership fee has the potential to pay for itself. Prior to the pandemic, the average American filled their gas tank roughly once per week [5]. According to GasBuddy searches, in large metro areas like Los Angeles, Costco’s average price per gallon might be somewhere between 25 cents and 50 cents per gallon less than the average price in the area [6]. If you fill up your 12-gallon tank once per week, the lower end of the scale results in a savings of $3 per full tank. That may not sound like much, but for one person, the $60 annual membership fee is covered in 20 weeks, or less than half a year. Furthermore, Costco’s most basic package, the Gold Star membership, includes a second membership at no additional cost for someone over the age of 18 living in your household. Let’s say, for example, your spouse also fills their 12-gallon tank once per week. The membership would be paid for in just 10 weeks, and you could still get cheaper gas for the rest of the year.

  1. Work from home

This isn’t an option for everyone, but it’s no secret that the best way to save gas is by simply not using it. According to the Pew Research Center, 59% of workers in the United States who are able to work from home are taking advantage of that opportunity [7]. The reevaluation of work circumstances truly kicked into gear during the pandemic, but even as the spread of the virus wanes, it can be a great option for those still looking to cut down costs at the gas station.

  1. Pay cash

Not all gas stations offer savings for paying with cash, but some do. In our transition to a cashless world, you might not carry cash as often as you used to, but a quick stop at your local ATM on your way to fill up might prove to be beneficial. Apps like GasBuddy may be able to show whether or not a gas station provides a discounted rate for customers who pay with cash [8]. Another easy way to tell if a station takes cash is if a sign clearly states that the rate per gallon is for cash payments. Some stations even have signs that flash between two prices, showing the price per gallon for payments with card versus the price per gallon for payments with cash.

  1. Find alternatives to long-distance hobbies

We would never advise that you give up your hobbies, but if you’re concerned about surging gas prices, staying home can be a good option. Weekend vacations or one-day getaways can easily be turned into staycations, and in 2022, there are so many great options for at-home activities. You can rent a recent movie, listen to music, play board games, grill out, invite friends over for a gathering, work out or play with your pets. The pandemic also opened the door for events like virtual happy hours and video hangouts, so if you just can’t reach your friends and family because of distance, you can still see them and interact with them extremely easily, all without spending a nickel on fuel.

If you have any questions about this article or how to protect your retirement plan during times of high inflation, please give us a call! You can reach Bulwark Capital Management at 253.509.0395.

 

Sources

  1. https://gasprices.aaa.com/
  2. https://www.moneycrashers.com/benefits-public-transportation-travel-for-less/
  3. https://www.gasbuddy.com/home
  4. https://www.costco.com/join-costco.html
  5. https://www.reviews.com/insurance/car/drivers-fueling-behavior-after-covid/#:~:text=Over%2082%25%20of%20US%20drivers,decrease%20in%20consumer%20gas%20purchases
  6. https://www.gasbuddy.com/home?search=los%20angeles&fuel=1&brandId=38&maxAge=0&method=all
  7. https://www.pewresearch.org/social-trends/2022/02/16/covid-19-pandemic-continues-to-reshape-work-in-america/
  8. https://www.tmj4.com/news/local-news/if-discount-is-offered-using-cash-and-not-plastic-can-help-you-save-at-the-pump
Mar 16
1

How Big Events Like Ukraine Can Impact Your Retirement

By | Geopolitical Affairs, Retirement

World events can impact your retirement, but you can be prepared!

The past few years have shown us that big world events can impact our lives at any moment. Sometimes we see them coming. Other times, we don’t have the ability to prepare and buckle in for the turmoil ahead.

The COVID-19 virus is one of the best recent examples of major world events impacting the economy. Now, the Russian invasion of Ukraine appears to be taking an immediate toll on Americans financially. It begs the question, can we prepare for these types of events so that we can, at least, soften the blow to our futures?

Well, the first step toward answering that question is knowing what to look out for when these major moments strike. Here are five ways big world events can impact your retirement:

  1. Market Shifts

Reactions to global events often shift the market, and in times of crisis, that shift is typically negative [ An article from ThinkAdvisor said a global recession because of a negative supply shock is now “highly likely,” especially when you tack on the fact that the world is still recovering from the spread of the COVID-19 virus[1].

Market downturns often hurt retirees, especially if they have to withdraw money from accounts like mutual funds, stocks or bond funds for retirement income while account values are down. For those in or approaching retirement, the situation can be difficult if they have no other sources of income and have to keep taking money out of dropping accounts, especially at the beginning of their retirement (known as “sequence of returns risk”). In fact, many people on their way into retirement during the Great Recession were forced to remain in the workforce when they lost everything[

It’s also worth noting that market crashes can actually help younger investors because they have a long time-horizon to retirement and can “buy and hold” bargains. In other words, if younger people are able to invest when the market bottoms out, it might be an opportunity to buy low in order to accrue higher long-term gains.

  1. Inflation

Inflation can have a profound impact on finances, and those taking the brunt of the blow might be the ones who are no longer stockpiling resources. Inflation isn’t a new concept, but when your retirement money doesn’t go as far as you hoped, it can put your plans for your golden years in jeopardy. Over the course of the pandemic, the United States sent stimulus checks to qualifying Americans three different times. With more money in the pockets of consumers, prices rose, and they didn’t fall after people spent their stimulus checks. In fact, they continued to rocket upward. The Washington Post reported that inflation reached 40-year highs at the time of Russia’s invasion, posing major questions for the U.S., the Federal Reserve and retirees stretching their financial resources to their limits[4].

  1. Gas Prices

This one is no secret. In fact, if you drive past a gas pump when supply is short, your jaw might drop. As the Russian invasion of Ukraine wages on, CNN reports the biggest jump in gas prices since Hurricane Katrina[8]. Russia is not the only supplier of oil, but it is Europe’s largest, producing 10% of the global demand. The U.S. imports just 8% of its oil from Russia, but energy is a global commodity, meaning that a rise in one part of the world causes a rise in another part of the world[10]. Bob Doll, the chief investment officer of Crossmark Global Investments, spoke to ThinkAdvisor to discuss the effects of the Russia-Ukraine war. He noted, several times, that oil prices can devastate the economy. He said the price surge is why the war should be investors’ chief concern in 2022. Doll went on to say that inflation is likely still yet to peak because of rising oil prices[2].

You might be wondering what that has to do with your retirement. The spike in oil costs and inflation drastically affect the purchasing power of a dollar, which could be most impactful to those living on fixed incomes. If you’re in retirement, it could force you to spend more at the pump, taking away from valuable dollars you may need for other expenses.

  1. Shifting of Retirement Ages and Plans

Uncertainty in markets, inflation and other results of a global crisis can also upset retirement plans decades in the making. In 2021, CNBC reported that 35% of Americans changed their retirement plans because of the pandemic[6]. 68.5% of those who changed their plans said they moved their retirement expectations back by up to 10 years. Some did report that they planned to move retirement up, but the uncertainty forced others on the brink of finishing their careers to table their hopes and remain in the workforce to continue collecting paychecks.

  1. General Panic

Major events, especially ones that have negative impacts on people, markets and finances, can cause panic. Common wisdom says to never make decisions in a panicked state, but it is easy to see how you might want to unload certain investments or liquidate assets out of fear that things might get worse. In his ThinkAdvisor feature, Bob Doll said advisors shouldn’t be recommending any major risks right now, arguing that investors have seen the market during wartime, and it typically bounces back[2]. Oftentimes, approaching the situation from a more measured perspective could actually provide an opportunity. A Kiplinger article used The Great Recession as a teacher for retirees in a crisis, citing one investor who remained patient, even adding to his investments as stock prices hit the basement[9]. He later said he was headed toward an early retirement and squashed his fear of volatility. With a calm, steady approach, retirees can take steps to fight market downturns.

If you have questions about how you can protect your retirement plans and weather global economic storms, please give us a call. You can reach Bulwark Capital Management at 253.509.0395.

 

Sources:

  1. https://www.thinkadvisor.com/2022/02/25/roubini-6-financial-economic-risks-of-russia-ukraine-war/
  2. https://www.thinkadvisor.com/2022/03/07/bob-doll-10-talking-points-for-advisors-investors-amid-russia-ukraine-war/
  3. https://www.nytimes.com/2022/02/23/business/economy/russia-ukraine-global-us-economy.html
  4. https://www.washingtonpost.com/us-policy/2022/03/02/powell-testimony-inflation-fed/
  5. https://finance.yahoo.com/news/russia-ukraine-crisis-what-can-prevent-150-oil-prices-112747924.html
  6. https://www.cnbc.com/2021/10/12/pandemic-has-disrupted-retirement-plans-for-35percent-of-americans-study-says.html
  7. https://www.aljazeera.com/news/2022/3/3/how-much-oil-does-the-us-import-from-russia
  8. https://www.cnn.com/2022/03/04/energy/gas-prices/index.html
  9. https://www.kiplinger.com/slideshow/retirement/t047-s004-5-retirement-lessons-learned-from-great-recession/index.html
  10. https://www.eia.gov/dnav/pet/pet_move_impcus_a2_nus_ep00_im0_mbbl_a.htm
  11. https://www.diva-portal.org/smash/get/diva2:727314/FULLTEXT01.pdf
  12. https://money.usnews.com/money/retirement/articles/2011/10/31/the-recessions-impact-on-baby-boomer-retirement

Investment Advisory Services offered through Trek Financial LLC., an (SEC) Registered Investment Advisor. Information presented is for educational purposes only. It should not be considered specific investment advice, does not take into consideration your specific situation, and does not intend to make an offer or solicitation for the sale or purchase of any securities or investment strategies. Investments involve risk and are not guaranteed, and past performance is no guarantee of future results. For specific tax advice on any strategy, consult with a qualified tax professional before implementing any strategy discussed herein. Trek268