Financial Reset in the 2nd Half of 2019
The year is flying by. It may be hard to believe, but we’re already halfway through 2019. Did you set financial goals at the beginning of the year? If so, how are those goals looking at the halfway point?
The good news is you have six more months to hit your objectives. Whether your goal was to save more money, pay down debt, or simply organize your financial strategy, you still have time to make it happen before the end of the year.
This also may be a good time to review your retirement plan. Generally, the financial markets have had a good year. The S&P 500 is up more than 13 percent year-to-date. However, that hasn’t come without turbulence. The index lost nearly 5 percent in May.1
If you’re approaching retirement, it’s important to periodically review your retirement strategy to make sure it aligns with your risk tolerance and time horizon. If you suffer a loss, you may not have time before retirement to recover. Below are a few tips to help you reduce the risk exposure in your strategy.
Rebalance your allocation.
It’s possible that your target allocation is perfect for your risk tolerance and time horizon. However, it’s also possible that your actual allocation doesn’t match your target.
Investment portfolios naturally become unbalanced over time. Some assets classes perform better than others. Some increase in value while others decline. This happens all the time with investments and financial markets.
However, as asset classes increase and decrease in value, they also become unaligned with your target allocations. For instance, an asset that was supposed to account for only 5 percent of your allocation, may account for much more if it increases in value. Similarly, an asset that declines in value may account for much less than its target percentage. The result is that you get a portfolio that doesn’t match your desired allocation and may even have more risk than you want.
Fortunately, you can correct this issue by rebalancing your allocation back to the desired target. In fact, it’s good to do this regularly, even on a quarterly basis. Many financial professionals can set up your account to automatically rebalance so you know you’re always aligned with the right strategy.
Shift to more conservative assets.
When was the last time you reviewed your allocation? If it’s been a while, you may need to do more than rebalance. It could be time to change your allocation altogether.
As people get older and approach retirement, they tend to become more conservative. This is because your time horizon has shortened. You have fewer years until you retire and actually need to use your money. A more conservative allocation reduces the odds of a sizable loss. It helps you protect what you have while still potentially growing your assets.
Review your strategy and discuss it with your financial professional. Is it time to move to a more conservative allocation? If so, consult with your financial professional to determine what types of strategies are right for you.
Consider an annuity.
Finally, you may want to consider additional risk protection tools. One possible tool is an annuity. Some annuities, like fixed indexed annuities, offer upside potential without the downside risk that exists in the financial markets.
With a fixed indexed annuity (FIA), you receive interest that is tied to the performance of an external index, like the S&P 500. If the index performs well, you receive a portion of the upside performance as an interest payment. If the index performs poorly and loses value, you don’t receive interest, but you also don’t lose any money.
An FIA can be an effective tool to minimize risk in your portfolio. There are a number of different FIAs available, so it’s important to explore your options. Your financial professional can help you determine if an FIA is right for your strategy.
Ready to reset your strategy for the second half of 2019? Let’s talk about it. Contact us today at Stoll and Basler Financial Services. We can help you analyze your needs and implement a plan. Let’s connect soon and start the conversation.
Annuities contain limitations including withdrawal charges, fees, and a market value adjustment which may affect contract values.
Annuities are products of the insurance industry; guarantees are backed by the claims-paying ability of the issuing company. Guaranteed lifetime income available through annuitization or the purchase of an optional lifetime income rider, a benefit for which an annual premium is charged.
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