Countdown to Financial Fitness: Should You Refinance?

Countdown to Financial Fitness: Should You Refinance?: We keep expecting interest rates to rise, but then they get cut again. If you're carrying a mortgage, maybe it's time to refinance...

Countdown to Financial Fitness: Retiring During a Crisis

Countdown to Financial Fitness: Retiring During a Crisis: This was going to be the year. Your 401k was robust, you'd put in your time, and a leisurely retirement was on the horizon. Maybe you ...

Retiring During a Crisis

This was going to be the year. Your 401k was robust, you'd put in your time, and a leisurely retirement was on the horizon. Maybe you even had an exit date and celebratory travel plans.

And then the coronavirus invaded. Words like "social distancing," "shelter in place," and "flatten the curve" entered our vocabulary. Masks and gloves became part of our wardrobes. Thriving businesses closed their doors. Jobs disappeared. The stock market tanked. Suddenly, your nest egg doesn't look so secure.

I faced a similar situation in 2008, on the cusp of the Great Recession. After years of working in the beleaguered airline industry—where we suffered pay cuts while employees in other industries earned raises, where I dodged the ax time and time again amid multiple reorganizations—I decided I was going to accept a retirement-incentive package as soon as I was eligible. And in early 2008, I had the right combination of age and years of service to take advantage of a buy-out.

Years of frugal living had enabled us to pay off our mortgage. We were debt-free and had no children to educate. Our investments were doing great. My husband's job was safer than mine, and I could be added to his health insurance plan. So, I signed the papers.

And then the housing market collapsed, taking the stock and bond markets along with it. Suddenly my retirement accounts didn't look as hardy.

I knew better than to yank my money out and cement my losses, but going off the payroll took away my ability to keep contributing to my 401k and dollar-cost average, taking advantage of fire-sale prices.

Reneging on my commitment to accept the early-retirement package wasn't an option nor did I want it to be. But, luckily, my company offered me the opportunity to work short-term as a contractor in one of my old departments while still drawing my pension. Contract jobs off and on for the next few years enabled me to shore up my portfolio and participate more in the market's recovery.

But what can you do now if you're in that predicament—planning to retire and suddenly not as prepared as you'd thought? In a few short weeks, we went from almost full employment to record unemployment claims, so postponing your decision to leave or picking up part-time work might not be possible.

Hopefully, you've already planned for survival without your salary. You've paid off or greatly reduced your debts. You've anticipated expenses, decided on the lifestyle you want in retirement, and figured out how to finance it. You've moved your investments to a more conservative allocation, so you don't have to sell volatile assets at a depressed price to cover living expenses. 

But still, if most of your retirement income was set to come from your investments, you might need to make adjustments. Here are some suggestions:   

• Review your asset allocations. After the drastic drop in the stock market and interest rate cuts, your investment distributions might be out of balance. Ensure that you've adjusted to a mix suitable for someone drawing down assets instead of accumulating them.

• Make your withdrawals from cash accounts, or mutual funds with the most stable values. This will give your more aggressive holdings time to rebuild their worth.

• Tighten your belt; comb through your budget and look for areas where you can reduce spending without compromising your values.

• Postpone major trips and events. (The pandemic might have already wreaked havoc with your plans for a big retirement bash or a family cruise.)

• Clean out your garage, your attic, your spare bedroom, and have a yard sale. (If it's allowed in your community and you practice social distancing!) Or sell some possessions you don't need anymore on e-Bay.

• Consider taking Social Security earlier. But be careful; be sure you really need the money now. If you're under full retirement age, you'll be permanently sacrificing some of your future earnings. The longer you wait to file (up until age 70), the bigger your checks will be when they finally come.  

Life is full of surprises, and the best-laid plans can sometimes fall by the wayside. But the more flexible, patient, and prepared you are, the better your ability to adapt.

What are your thoughts about planning for retirement? I’d love to hear your comments.

Sharon Marchisello is the author of Live Well, Grow Wealth.
Sign up for her newsletter at sharonmarchisello.com

Countdown to Financial Fitness: Conserving Resources During a Pandemic

Countdown to Financial Fitness: Conserving Resources During a Pandemic: Financial experts preach about the need for an emergency fund. If your income stream suddenly ended because of lock-downs forced by the co...

Conserving Resources During a Pandemic

Financial experts preach about the need for an emergency fund. If your income stream suddenly ended because of lock-downs forced by the coronavirus pandemic—with no assurance of when it will restart—and your expenses continue, you’re probably dipping into that emergency fund now. The more robust, the better.

As a reminder, an emergency fund is three to six months’ living expenses tucked away in a liquid, low-risk asset like a savings account or money market fund. Not the stock market.

Unfortunately, nearly a third of Americans have no emergency fund and many more live paycheck to paycheck. When the paycheck abruptly stops, they’re in real trouble.

Unemployment, some debt forgiveness or deferment, and the $1200 relief check from the federal government will help many, but for others, it won’t be nearly enough.

Depending on how long this pandemic and resulting economic fallout last, there will be businesses that fail. Not every job will come back.

If you’ve lost your job or business and you don’t have an emergency fund, it’s too late to start one now. But there are a few things you can do to conserve resources and stay afloat:

·        Refrain from unnecessary purchases. With malls and many retail stores closed, this is easier than ever before. But if you’re addicted to online shopping, step away from the computer.

·        Don’t be a hoarder. Buy only the supplies you and your family will need for the next few weeks, and perhaps a little extra if you anticipate problems getting back to the store for reinforcements. You won’t tie up so much cash, and you’ll be a better citizen.

·        Conserve energy. With fewer places to go now, it’s easy to save money on gasoline for your vehicle. At home, turn off unnecessary lights and appliances, keep the temperature inside as close to the outside temperature as you can stand. (Luckily, it’s spring in most places, so we don’t have to spend a lot heating or cooling our homes right now.)

·        Conserve water. Turn off the faucet while you’re brushing your teeth or sudsing your hands for 20 seconds. In the shower, turn off the water while you shampoo or condition your hair. If you have some downtime at home, fix leaks and cracks.

·        Don’t waste food and paper products. You may have already figured out how to ration toilet paper!

·        Cook more from scratch. There are plenty of free online videos that teach you how to prepare easy, nutritious, and economical dishes for your family. Take advantage of seasonal fresh produce that is still on sale. Store leftovers promptly, label, and use.

·        Negotiate with creditors about waiving late fees, lowering interest rates, and/or relaxing repayment terms. They know everyone is hurting and most should be willing to work with you if you’re sincere about your obligations.

·        Defer discretionary expenditures. Some of these decisions may have already been made for you: large social events, vacation travel, visits to amusement parks, etc.

·        Leverage credit. Normally, I don’t advocate taking on more debt, except as a last resort. These are desperate times, and debt may be your last resort. Make sure it’s for a “must-have” rather than a “want-to-have.” And pledge to start paying it off as soon as you’re back on your feet.

Life may look bleak for the moment, but one day—hopefully sooner rather than later—this pandemic will be over and the economy will begin its recovery. As soon as you’re able, start an emergency fund, so you’ll be better prepared next time!

What are your thoughts about emergency funds? I’d love to hear your comments.
Sharon Marchisello is the author of Live Well, Grow Wealth.
Sign up for her newsletter at sharonmarchisello.com

Countdown to Financial Fitness: Investing in the Age of Coronavirus

Countdown to Financial Fitness: Investing in the Age of Coronavirus: The stock market continues its roller-coaster ride, previously solid industries disintegrate, and small businesses collapse like a row domin...

Investing in the Age of Coronavirus

The stock market continues its roller-coaster ride, previously solid industries disintegrate, and small businesses collapse like a row of dominoes. Have we hit bottom yet, or will the freefall persist as more bad news unfolds?

Is it time to buy, or wait for a further decline? Or sell while equities still have value?

Will the aid package be enough to keep the economy on life support until we can get the COVID-19 pandemic under control?

As with any crisis, any huge upheaval, the survivors will be those who can adapt quickly to the new normal. Companies that already have a robust remote workforce—with secure networks, portable tools, and efficient communication systems—face less disruption than those starting from scratch. Companies that sell online training, conferencing software, security packages, and other work-at-home tools have seen a surge in commerce.

Those in the food supply chain and makers of personal hygiene products are in little danger of failing. The consumer staples sector weathers most storms.

Medical provisions are in high demand. But depending on how long the pandemic lasts, companies just ramping up to make ventilators, masks, and other needed hospital products risk being late to the party and stuck with surplus inventory. We could see a rush to invest in companies that are working on drugs to treat this disease or a vaccine to prevent it. If successful, their stock could soar. Otherwise, not.

Restaurants with a take-out and/or delivery system in place are faring better than those that offer a dine-in experience only. They can move staff from waiting tables to taking phone and online orders or making deliveries.

Creative adjustments and reinvention may be called for. I read a story recently about an event caterer whose business dried up with the pandemic. Instead of folding and wringing her hands over the unfairness of it all, she started advertising a new service around town: cooking for and delivering food to individual families.

Some businesses, by their very nature, don’t lend themselves well to social distancing. While you can prepare tax returns or legal documents without face-to-face contact, it’s hard to cut hair or paint nails and stay six feet away from your customer. If you own a movie theater, you’re closed until further notice.

The travel industry is eroding as airlines are forced to cancel flights, reduce capacity, and stop flying to many international destinations. Cruise ships have become floating Petri dishes, and most voyages for the near future have been canceled. No one wants to book a vacation because we don’t know how long this will last. Airline and cruise stocks have plunged in the past weeks. If you buy their stock now at these depressed prices, how long can you wait for it to recover? Maybe airlines will focus on moving cargo instead of passengers, at least for the time being in order to stay aloft. Perhaps idle cruise ships and empty hotels can be re-purposed as quarantine centers or supplemental hospitals.

Widespread job loss has far-reaching effects. The person who can no longer work in his customer-facing position now has to defer discretionary expenditures. That doesn’t bode well for the contractor who was going to handle his remodeling project. The ban on large gatherings means that a wedding is postponed, which takes away work from the florist, the caterer, the bridal shop owner. When the shop owner has to shut down and lose his revenue stream, he can’t pay his rent, which will leave his landlord in a financial bind.

Spending more time at home these past weeks, I’ve noticed neighbors out walking their dogs, playing with their children, doing things as a family. (With schools out, companies that sell homeschooling materials should see some opportunities.) Gyms are closed, so people are walking or riding bicycles. Perhaps there will be increased demand for home exercise equipment. Maybe there will be a surge in sales of board games, home theaters, and other types of home entertainment.

Animal shelters and rescue groups are suffering because they’re unable to hold public adoption events. But with so many people quarantined at home, some are stepping up to foster homeless animals. Maybe the pet food and supply industry will see a surge as temporary foster parents become attached to their animal companions and decide to adopt.

Those who know how to cook are eating better than those who are used to consuming most meals out. Especially those cooks who are flexible enough to experiment with substitutions when the usual ingredients for their favorite recipes are out of stock. Perhaps there will be a burgeoning interest in cooking classes, and cookbook sales will increase.

As an author, I hope people will rediscover reading during this period of social isolation. That’s a bit of a challenge with libraries and bookstores closed, and Amazon.com classifying book orders as “nonessential,” but there are still audio and e-books available. And while most bookstores aren’t open for browsing right now, many will take orders online or over the phone and ship books to waiting readers.

Whether the stock market is up or down, there are always investment opportunities. Look around you and observe what is trending, what needs must be filled. And try to ignore the hysteria of the crowd. Eventually, this will pass.

What are your thoughts about investing now? I’d love to hear your comments.

Sharon Marchisello is the author of Live Well, Grow Wealth.
Sign up for her newsletter at sharonmarchisello.com