Protecting Retirement Savings in an Election Year

Ever wondered how to keep your retirement savings intact during the unpredictability of an election year? In this episode Mark and Evan Fricks guide you through the minefield of market volatility triggered by election cycles and share strategies that can help maintain a steady, long-term investment approach. They caution against knee-jerk reactions to media hype and market jitters, which can lead to detrimental portfolio moves, and advocate for a balanced retirement roadmap that leverages both growth and income strategies, utilizing modern tools like computer algorithms and AI to enhance your decision-making process.

Have a topic or question you'd like Mark and Evan to address in a future episode? Email us at info@masterplanretire.com or call 770-980-9262.

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Advisory services offered through MasterPlan Retirement Consultants, Inc., a Registered Investment Advisor in the state of Georgia. I

Visit masterplanretire.com to access our retirement checklists, podcasts, and schedule a complimentary consultation.
Call 770-980-9262 to speak directly with someone about your retirement planning needs.

https://masterplanretire.com/

Catch all episodes of our podcast at https://www.masterplanyourretirement.com/resources/episodes

Listen to Mark Fricks on Saturdays at 12:00 p.m. on XTRA 106.3 FM WFOM.
Sign up for one of our upcoming events at https://www.masterplanyourretirement.com/events

Purchase Mark’s book, The Road Less Traveled: Turning Your Retirement Worries Into an Excursion of a Lifetime, on Amazon: https://a.co/d/4fx94Al

Advisory services offered through MasterPlan Retirement Consultants, Inc., a Registered Investment Advisor in the state of Georgia. Insurance, tax and commodities services offered through Fricks and Associates, Inc. dba MasterPlan Retirement Consultants. The aforementioned are affiliated companies.

Transcript

Speaker 1 0:06

Hey folks, thank you for joining us. Welcome to Retirement Roadmap with Master Plan Retirement Consultants. My name is Evan and with me, as always, retirement planner Mark Fricks. Mark, how are you today? Doing real good, real good, Just my favorite time of year. It's a fun time of year. We're about a month out from some pretty big elections. I heard that Speaking of this time of year.

Speaker 2 0:26

I don't know if you've heard Through the grapevine, I've heard a little bit about that. So yeah, which is fun to watch all the stuff. I mean I can't stand the political fighting but I enjoy kind of seeing the issues come to fruition and kind of what they really believe and then kind of what they sling back. It's almost like a game show.

Speaker 1 0:44

When they actually do speak on the issues. Yes, I do.

Speaker 2 0:52

Well, yeah, we won't get too deep into that, but I agree with that. But it is an interesting time of year because all of our clients are asking us about it Not who we're voting for, but what's the effect and so all we can do is look at history, which I think is what we may be doing today.

Speaker 1 1:01

That's exactly right. Well, today we're going to be talking about how to protect your retirement savings in an election year, so election cycles can trigger market volatility, as uncertainty over who may be shaping public policy in the White House and Congress can cause some angst on Wall Street. The talking heads in the media tend to create public anxiety far more than provide qualified information.

Speaker 2 1:24

That's their job.

Speaker 1 1:32

So we see clients often having to watch their reactions to some of these things and then they come in very fearful to us a lot of times. So we're going to discuss how to stabilize your retirement portfolio and protect your savings in a volatile election year. So you can't control the election outcomes or what the market may or may not do, but you can build your own retirement economy and your own desired market experience. That revolves around your lifestyle, what you want and the plan that you've set forth. So the first point on this topic would be to consider the current market landscape. So history shows that consumer spending and economic growth ebb and flow. As we know. The market goes up, it goes down, and that happens in and out of election years, correct, mark?

Speaker 2 2:09

Yeah, absolutely. And you look at the history of the stock market and I know we're going to get into it some day as well but you do see that it's more about staying the course, making a plan. Staying the course it depends on where you're at in your life, how far you are away from retirement, what are your short-term goals, long-term goals? But you can't look at the day-to-day situation. When the market's down, you know however many points. We know long-term it's going to grow and it's usually down because of overreaction, you know, either, by people in Wall Street. Maybe they decide, hey, we're going to take some profits and all of a sudden they start panicking because even people on Wall Street have emotions. We talk about clients having emotions and being spooked. Wall Street does too. Just give them time to settle that out. That's right. Leave it alone.

Speaker 1 2:53

Yeah, election years can be volatile but historically the market recovers in the long term, regardless of who wins. So you're looking at the long term. You've got your plan in place, which brings us to the next point Resist extreme portfolio moves. So when I say long term, don't let the talking heads or whatever scare you into moving everything to cash or going to some investment that someone told you was going to or that you heard online was going to explode and be a great opportunity. Savvy retirement investors know the market is a long-term game and will not make significant moves as a result of election jitters. If you're retired or soon to retire, you should already have begun to dollar cost average out of the market to have appropriate risk tolerant buckets. If you feel a market crash would be detrimental to your portfolio, then you probably don't have the proper bucket set up.

Speaker 2 3:44

That's right. You're probably using archaic methods of investing. Maybe you're working with somebody, maybe you're not, but that's why we always talk about having a retirement roadmap. That is about a lot of different pieces, but the most important piece is growth and income, and so that long-term plan it needs to be followed. You don't knee-jerk reaction about things. And so, again, I was reading a little bit about Warren Buffett the other day and his philosophy, and he keeps stuff for years Now I'm not saying that's correct for every holding and he does a lot more research than our average client.

Speaker 2 4:23

Because we do make more moves than that, because we're trying to grab the profit and then get out before it goes down. That's called active trading. But we don't get out because we're panicking. We're getting out because the algorithms of the computers tell us the trend is slowing on this particular holding, but it's building on this holding. Let's switch to this holding and research has shown us, as we've talked about before, three to four percent better return long term, with less risk, by using those computer algorithms. Take advantage of what's there, and now they're beginning to introduce ai into some of these algorithms to maybe even get a better hold, because one thing about computers is they don't have emotions, and so they'll be giving us good information that should help us do a better job. Yep, perfect.

Speaker 1 5:06

Next topic don't rely on so-called safe money, so no particular stocks or funds hold up well during an election period. You never know. Each election has such unique issues that it's hard to pinpoint any fund or sector that will do well. The one major difference in this current election period than others that we haven't seen in decades is that quote unquote safe money pays fairly well. I'm referring to investments like certificates of deposit. However, if that was your go-to strategy in the last year, you severely underperformed the market and you barely kept up with inflation. We actually had a really great year this year.

Speaker 2 5:45

You start hearing about these CDs paying five, five, five and a half, and it's very enticing because they've not paid that in so long. But the market did. You may have the numbers, but did significantly better than that. And so if they'd stayed the course of that instead of that squishy good feeling right, you know then they would have certainly made a lot of money right and so, and even moving forward.

Speaker 1 6:04

we know the fed has just lowered the rates and they're continuing to do so. Those CDs, those interest-bearing investments, are not going to perform like they have in the past, more recently, so that so-called safe money might not outperform the market during elections. Consider a more diversified portfolio.

Speaker 2 6:24

Well, I love the point you made about what sector is going to do well. What types of stocks would do well. Will it be small cap, large cap? None of them care about the election. I mean, these are companies that are trying to make money. They're providing consumer goods, they're providing goods to businesses, and so it's what's going on in the economy.

Speaker 2 6:42

Wall Street doesn't care a whole lot about who's going to get elected, because if you look at the history we had a show a few months ago about this pretty much the markets perform the same way regardless of who's running and who gets elected, things of that nature. Now it can have an effect later on, based on policies. You know, if they suddenly raise taxes by 20% or whatever you know may occur, yes, that could affect some markets, but the election itself, it's just going to again, it's what's making money, what's growing, what's thriving. You know like right now, ais, a lot of AI stocks are doing really, really well. That doesn't mean that they'll always do well, you know. In fact, a couple of them have pulled back a little bit, but long term, we see technology, biometrics, robotics, things like that being strong. But also what is it?

Speaker 2 7:29

Johnson and Johnson and Colgate, palmolive and things like that. They make toothpaste. Well, not everybody, but most people use toothpaste pretty regularly. So these are things that are going to be the slow growth strong things. And then I'll be that affected by the election because again I'm going to brush my teeth, no matter who wins Right.

Speaker 1 7:49

Well, even with those companies that we know are defensive stocks and defensive places to allocate, it's still looking at the investment strategy as looking at product or looking at one specific thing is the answer the same, as we have people in these kind of times come up to us and say, oh, I was looking at the CD, with this rate, I was thinking about putting X amount in this thing. You know, it's not looking at the whole plan together because, yes, you do want some defensive stock, but you also want some stock that might grow some in these more volatile times as well. So it's about the balance. It's about, more than anything else, having a plan. It's not, oh, now I need to be all in over here because this is what we're going to have. It's the balance it creates and, just as you mentioned this, actively managed accounts, portfolios that are rules-based.

Speaker 1 8:38

They rely on mathematics, algorithms and what rules that they've determined for that portfolio. It's not all your money in one of those either. It's get the balance you need for your lifestyle, for your plan, so that when one is maybe trailing a little bit, the other one maybe is shooting off. They have a good negative correlation to each other.

Speaker 2 8:58

Yeah, it's kind of like the next layer to diversification. I mean, we talk about diversification some small cap, some large cap, but even deeper than that. It's like having a bucket that's conservative Therefore it may be full of defensive stocks, as one that's more aggressive for the longer term. We know it's going to make money long term. Be a little more aggressive with stocks that are maybe small cap, mid cap, that have a lot of growth ahead of them. It's also having some protected accounts for future income, because they're going to grow with a good market but not go down with a bad market. So there's, and then there's the layer of you know, should we be heavier international, heavier US or whatever it may be emerging markets? And then you have tax diversification. This is not a tax show, but it's just another layer. So it's a lot more than having a 401k with 20 funds and we switch a couple of them around. It's so much more sophisticated than that and as you get closer to retirement, it's more important as well. Yeah, yeah perfect.

Speaker 1 9:57

So the next point don't stop investing due to an election. Stick to your long-term plan, so taking a wait-and-see approach with your portfolio is not advisable. Don't procrastinate on important financial moves like saving more or updating your investment strategy, because you're waiting to see how everything shakes out with the election. Stick to your plan. Keep doing the boring but important stuff, like maximizing your contributions to your 401k, your Roths or IRAs, and avoid credit card debt. Market pullbacks are common, but staying invested has historically led to higher returns over time. Also, if you're invested and the market drops, well, you've still got the same amount of shares. So when that market starts climbing back up or maybe you even take a step further, and when your account drops, you buy some more you're going to be really happy coming out of that.

Speaker 2 10:46

Absolutely. I think I may be getting ahead of you. I think I saw somewhere in our notes, our pre-show notes, that was it 2009, when the S&P was at 950? I have it. It's great, you want to hear it?

Speaker 1 10:58

Yes, I think it's a great time to mention that. So market pullbacks are much more commonplace than one might think. So since 2009, there have been 29 pullbacks, when the S&P 500 fell 6.5% or more, that's 15 years, that's over 15 years.

Speaker 1 11:12

So each felt like an impossible moment, including many politically driven sell-offs, yet each had a temporary market impact. Now this is where it gets interesting. On January 1st 2009, the S&P opened at $903. Today it sits around $5,600. That would have been more than a six-time return on one's money if you had stayed invested, including the all-too-common harrowing moments in the past 15 years. So that just goes to show you, unfortunately. I know somebody I'm pretty close to who, after 2008, moved their entire 401k to the cash position and has kept it there since then out of fear, didn't seek out any professional help or financial help or anything else like that. Not only did he miss that initial bounce back from 2008, 2009, but he's missed all of that growth on the 15 years.

Speaker 2 12:08

900 to 5,600 is an amazing number over 15 years. But also that's two corrections a year. You got 29 in 15 years. So you start thinking about that. Oh, we're going to have two corrections this year. I'm not sure if that includes bear markets or not as far as a correction goes, but you know we get so spooked by these. Oh, this has never happened before. Yes, it has. I mean, think of the markets in World War I, world War II. Think of the markets during the Vietnam conflict 9-11. I mean all of these events. You look at the history and very quickly the market recovered because it was the initial emotional impact, but then you had growth after that. So you know, every market pullback has opportunities, but most importantly, the best opportunity to stay in the market. That's right. That's right.

Speaker 1 12:56

Great. So the next topic is ignore the noise Now. I mentioned the talking heads at the beginning of this episode, but historical precedent suggests market hyperbole, not volatility, will be in high supply. So, going back to 1928, there have only been four times when the markets declined during an election year, and the seeds for those corrections, such as the tech bubble and credit crisis, we're independent of the election itself. So that's why patience and perspective are always key to navigating bouts of higher volatility. Market downturns on the whole aren't worth losing sleep over.

Speaker 2 13:30

No, and even a few weeks ago maybe a month or so ago we had that big market turndown, correction or whatever you want to call it over, about a four-day period. Thankfully, our clients understand, they have a plan, it's long-term and of our hundreds of clients, we had two people contact me and I basically talked them off the ledge. It took five minutes. They're like you're right. And then, two days later, when the market totally recovered, they're like thank you for not letting me sell then. And I want to get back to a point you made too, evan.

Speaker 2 14:01

So the 2008, 2009 Great Recession was historically, more money moved into cash than ever before in the market, and so that just tells you. There was so much panic and typically it didn't happen the first three months. It happened after the market had hit its trough, its valley, and so you have locked in those losses and then, who knows when, you went back in the market because most people were scared. You may have waited three, five, ten years or, like your friend, ever gotten back in the market and think of the losses, think of what they failed to receive. I mean just it's horrifying, it really is.

Speaker 1 14:37

I don't think people consider it. It's a very simple thing. I don't think people really consider what it means when you lose a lot of money in the market and you choose okay, well, in order to protect what's left, I better move to cash. They think that they're protecting their assets, but what they're really doing is accepting that level of loss rather than giving their investments an opportunity to catch back up. Yeah, or?

Speaker 2 15:02

maybe, like you said earlier, buy more, or please buy more, man, and that's tough to do. I understand that's tough, you know the markets look like they'll never recover, but they will, because people still eat, people still drive, businesses still function, so it's just wait it out. By the way, I want to remind you to visit our website, masterplanretirecom. We have a lot of resources there. All of the shows we've recorded over I don't know how long going back, is there available as a podcast. It's in your pocket, as you like to say, on your smartphone. It's on YouTube so you can link to those things. But, more importantly, the website has two of the things resources, including classes, coming up, but also there's a little button.

Speaker 2 15:49

It's called Schedule Now and basically what we offer to our listeners and watchers is the opportunity to chat with us, find out more about, kind of what your feelings are, your goals, your concerns, and maybe some strategies, some ideas. We also can run them, as you know, evan seven to nine reports to show you where you're at. If you don't know where you're at, you don't know how to get where you want to be, and so that's the beginning of a plan. This is all complimentary, by the way, so that opens up our calendar, gives you a chance to chat, phone, zoom, meet face-to-face, whatever. Take advantage of that. A lot of people procrastinate, I'm sorry. It's almost like they're afraid to know where they're at. But we have people come in at age 70 that are way behind, but we're actually making such great progress because we have a plan. And so don't wait too late. Don't wait too early. Is that a word? Don't wait too early.

Speaker 1 16:44

Well, it's certainly a phrase of whether it makes sense, as one.

Speaker 2 16:47

I think y'all get it Okay. So, by the way, the phone number as well 770-980-9262. We do still have phones here as well.

Speaker 1 16:59

Yeah, we do. Next point focus on portfolio management. So it never hurts to review your portfolio, see if it needs some rebalancing, especially if you're worried about election-driven market volatility. If you're younger, you can likely afford to write out the election-related turbulence and just keep a larger share in stocks for the long-term growth. If you're nearing retirement, especially if you're retiring on your assets for income, consider setting up retirement income layers that are protected from economic and market volatility so your lifestyle doesn't go on a stock market rollercoaster ride For funds that are in the market. Like we mentioned earlier, consider some of those actively managed portfolios.

Speaker 2 17:40

Which is exclusively what we use. I mean every portfolio we have. We have over 200 to 300 portfolios available, and so we want to look at what is the purpose of this money. What is your risk tolerance? We don't want to take too much risk because then you could panic. But again, if you've got six different accounts, each with a purpose, I'm not going to worry about that little bit more aggressive portfolio because I know it's going to be there for a while. I just leave it alone. Short-term money is much more conservative or, like you said, protected accounts so that we can have future income in retirement. So getting that diversification of accounts as opposed to one big bucket of money where we think we're diversified, take it to another level. That's true retirement planning.

Speaker 1 18:23

Yeah, and again, like I mentioned earlier, I think it's a really good point. If you're afraid that a market downturn would decimate your retirement, then you're probably not allocated correctly.

Speaker 2 18:31

You don't have a plan. You're not where you need to be.

Speaker 1 18:42

Right, perfect. So everyone's situation is different. So consider meeting with a financial advisor for personalized advice. The key is tuning out the short-term election noise and focusing on the financial plan that matches your unique retirement vision. That's how you win in the long run. So finally, the last point. We touched on a little bit and we have full episodes of our radio show on this topic, but retirement tax strategy window in this election season. Right now we've got a strategy window that's open for about another. What month is it? We've got another 14 months.

Speaker 2 19:09

15, 14 months yeah.

Speaker 1 19:11

So the 2017 tax cuts expire on December 31st 2025. So we do have a window where, now we know our tax brackets are historically low. What's the implication?

Speaker 2 19:26

of that, mark. Well, it gives us 14 months of assurity that we can do some conversions. We can get rid of some of those IRA monies that may explode in the future because of rising taxes, even for your heirs, children, grandchildren. They're going to have to pay the taxes on those when they inherit them, and so getting more things converted. We've had, like Evan said, shows about this several times. But take advantage of that over the next however many months.

Speaker 2 19:55

Now we don't know what could change, depending on the election. Maybe whoever gets in office extends those cuts or makes them permanent or makes them better. But the flip side is is they could let them just sunset and those rates are going to go up for the average American between 15 and 20 percent. Ok, and I'm not talking about the rich, I'm talking about middle class rich, the whole. You know everybody that pays taxes. They're going to see a bump up, okay. So, um, um, maybe rat your Congressman, I don't know. But let's see who gets an office, let's see what they do. There's so much, um, you know, you know, um, fighting and infighting in Congress. I'm not sure they could make any changes anyway. So it may just sunset If one party or the other doesn't get a big enough. You know what's it called Majority. Thank you, big enough majority. So we don't know what's going to happen, but we do. We're pretty sure they won't be able to make a change over the next 14 months, so take advantage of that window for sure.

Speaker 1 20:57

Absolutely. Now's the time to make tax minimization moves on your retirement money, while tax rates are at all-time lows. Also, I referred to this section of as retirement tax strategy. It's something you need to consider well and make a strategy for your conversions, because this isn't the only time. It's not like after 2025, we just can't convert anymore. But we want to discuss that long-term strategy. You also don't want to do your entire 300 000 401k all at once, because you're the chunk of of tax money that's going to have to come out of that. It's going to hurt in the long run. Put you right in the highest bracket, absolutely so. Strategy is critical, you know. Talk to a finance professional, contact us, masterplanretirecom. In closing.

Speaker 1 21:45

Election years can be volatile, but historically, the market recovers in the long term, regardless of who wins. Stick to your long-term plan and don't let the talking heads scare you into any rash decisions. In order to stick to a plan firstterm plan and don't let the talking head scare you into any rash decisions. In order to stick to a plan, first you have to create a plan, and that's where we come in. We'd be more than happy to talk to you. You can visit masterplanretirecom schedule now. You'll have a complimentary consultation with one of our advisors. That's an opportunity for you to discuss your hopes, your dreams, your fears and retirement.

Speaker 1 22:15

We'll take what we get from you and run a series of reports. That's a 10,000 foot view of your own retirement. What happens if we just turn the key, put in the ignition, turn the key, turn on your retirement? What's the perfect world look like for you? How you're set up right now? How long does your money last? What does your retirement look like? We'll take that picture and then we'll stress test it. What happens if we have a series of bear markets? What happens when taxes go up? What happens if inflation increases? Things like that, the passing of a spouse how is that corrected? How is that affected? We need to know where the weaknesses are in order to fix and prepare them.

Speaker 2 22:52

Well, I think two very important things about working with a true retirement consultant, a retirement planner, not just an advisor, investment advisor or whatever. Two things happen. Number one is by having a written plan. You find comfort in that, okay, because you know if we need to zig here, then zag there. We know how to do it and when to do it, and we have a strategy for it.

Speaker 2 23:16

I think the second thing that we really provide, evan, is the peace of mind of knowing that there's somebody there to kind of keep your feet grounded and not panic and say, okay, mark, just remind me, Evan, just remind me, we're doing this, we got that, we got this going on, we got this going on, we're good. And I'm like, hey, we're good, we're good. I mean, no matter what the market does now. Uh, you know, some of our accounts may slip some, some may actually grow some, but long-term we're on the right track. If we need to make an adjustment, we'll make an adjustment, but that's not because of fear and and and or greed, right, it's because it's the right year to do this, with the elections coming up. So until we see each other again, remember, plan well and prosper, take care. This was Retirement Roadmap Radio with Mark Fricks of Master Plan Retirement Consultants. To schedule a complimentary consultation, go to MasterPlanRetirecom or call 770-980-9262.

Speaker 3 24:29

Thanks for listening and remember plan well and prosper. Representations can be made as to its accuracy. All ideas and information should be discussed in detail with one of our qualified representatives prior to implementation. Advisory services offered by MasterPlan Retirement Consultancy, a registered investment advisor in the state of Georgia. Mark Frick's and MasterPlan Retirement Consultants are not affiliated with or endorsed by the Social Security Administration or any other government agency.