It doesn’t have to be Groundhog Day for Airmen to gain in today’s pain
By Kevin Startt, ChFC, Dobbins Personal Financial Counselor Program
/ Published March 31, 2020
The cabin fever is building as the family begins to watch the third version of many movie classics on another soup d’ jour streaming service in the living room. Take the Bill Murray classic “Groundhog Day,” a spoof on the February 2 holiday, when Murray’s character, Phil Connors,” is forced to live the holiday over and over again. Since Groundhog Day was the infamous day when the Big Apple’s Health Commissioner told everyone to “go about your daily lives” with New York City’s risk low and the city’s preparedness high. This has played out over and over again across America yet economic lessons remain as novel as the virus itself. Here are 9 tips to ensure that we make it through this financially intact as a family and stronger as a society.
- Utilize the checks that will go out to millions of taxpayers to prioritize basic, absolute needs first such as housing, food, transportation and utilities. If you do have a job, this is a great time to start a rainy day or emergency fund. Some of the goals for savings rate right now are 1.50% and above. Use targeted gasoline savings to pump prime savings.
- If you missed the warning signs about an overvalued market in early 2020, are under age 50 and have the bulk of your savings tied up in a TSP or 401(K), don’t try to time the market. Do that if you have a segregated trading account. Missing the best 5 days in the market, like we have seen recently you would have missed 35% of the markets nearly 400% gain over the last 11 years prior to February 12, 2020, according to Fidelity. Missing the 10 biggest days would have eaten up half of your return. Stay put, the market is at least a little less overpriced than it was at the beginning of the year. It’s all about time in the market and not timing the market.
- Downturns happen so keep a positive spin on the fact that the negatives in the market’s performance happen less often than the bull markets do and are typically short-lived.
- Through regular LES or payroll withdrawals, you can be assured of three absolutes, especially if you withdraw money wisely at retirement. Dollar-cost-averaging assures us that we will buy more shares when the market is lower and less shares when the market is high. In addition to the benefits of buying more shares low and less high, one will be buying shares at a lower average cost. This works in a normal bull market when contributing money to buy shares in a bear market. It will work the opposite way when retirees are taking money out one is forced to take withdrawals out.
- This is a great time to get with your advisor to not only get their take on the downturn but get a portfolio stress test done based on your current asset allocation. This test is not scientific but will give you a good time to scope out your ability to tolerate risk during these perilous times.
- Invest lump sums in bad times and good times. Some of the best times to buy stocks have been when pundits were projecting the sky was falling and negative thoughts dominated. Buy your straw hats in the winter time and wool hats in the summer. Stocks are not that much different and many of the tortoises(or cheap dividend paying value stocks are paying more than in safe income streams than savings accounts or bonds. Dividends are as much as 25% of stock markets total gains historically, according to Ibbotson.
- Open a Roth IRA or add to your Roth with your stimulus check. For $3.28 a day or a cup of Latte or Monster Energy, you can do a catch-up contribution over the age of 50 that within 5 years or age 59, will be penalty free. Even a back-door Roth might make sense for some red zone retirees.
As I gaze out at a lonely trampoline which last Saturday was inundated with bouncing bobble headed kids, enjoying life as though nothing had transpired, I am reminded of the hundreds of screws and springs it took to construct the trampoline on a basking sun beautiful Saturday. I am reminded of how our prescription for success failed several times but in the end, at the end of the long day, how much enjoyment the construction of the trampoline had brought. So it is with the bouncing of the capital markets and the many failures we will have as a society in conquering this virus. In the end though, we will succeed and bask in the glow of a normal day again and normal markets again, having lost much but gained so much more going forward. In the meantime, look ahead and above. Joy comes in the morning!