• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer
main-logo

Zynergy

Retirement Planning

  • 732-784-2380
  • Member Login
  • Home
  • About Us
  • Our Services
  • Retirement Education
  • Retirement Enrichment Program
  • Zynergy Cares
  • Contact Us

Forced Into Early Retirement Due to Covid? What You Need to Know

covid

October 28, 2020 by Ryan Zacharczyk

Covid-19 has left many companies faced with the undesirable prospect of having to lay off many in its workforce. Although this can be financially devastating to younger workers with families, for those only a few years from retirement, it may do nothing more than speed up their plans.

If you find yourself in a position where you may be faced with early retirement, here are a few things to consider:

  1. Review your financial plan – Even if you updated your financial plan recently, the time has come to adjust to your new normal. If you have not done a financial plan in a few years, you are long overdue. Sit down with your financial professional, layout your goals and objectives, and work together to put a plan together that works for your early retirement.
  2. Apply for Social Security – If you are eligible and your planner agrees the time is right, get your application for your Social Security retirement benefits right away. It can take up to two months to receive benefits, so if money is tight, this is not something you will want to delay.
  3. Make sure your budget is updated – If you have been relaxed about spending during your working years, it’s time to get very clear about your budget is during retirement. Working with your planner to understand what will be coming in and where your spending priorities lie are without a doubt the most important aspect of any good financial plan. Once your budget is complete, don’t put it in a drawer to look at once a year. Use the aid of an app like Mint.com to track your spending and make sure you are living within your means.
  4. Look for your “second-act” (if that’s your thing) – Often, when retirement is thrust upon us later in life, we may feel that we are too old to start a new job in the rat race we have become accustomed to, despite not yet being ready to retire. In this case, finding a part-time job doing something you really enjoy doing can be the perfect balance of quality of life with financial stability. Perhaps you love to surf and decide that teaching surfing classes to kids would be the perfect second act for you. Maybe golfing is more your speed and you decide to get a part-time job as a starter at a local country club that offers free membership as a perk to employees. If you feel too restless to retire in full, think about what you love to do and make your second act about enjoying that activity while earning a little money along the way.

A surprise retirement may be startling when it hits but can be a wondrous opportunity to create the life you had been planning for a few years earlier. Follow the steps above and make lemonade out of Covid’s lemons!

Filed Under: Retirement Questions Tagged With: covid, covid-19, early retirement, retirement, retirement planning

August 17, 2020 by Ryan Zacharczyk

FAQ: Why is the market going higher with Covid still such a big risk to the economy?

Answer: This is a question that has perplexed many since mid-April. In an attempt to clearly explain, I will give you a short answer and a long answer.

Short answer: The short-term moves of the market are extremely humbling to those who try to predict them. It is impossible and even folly to do so. All of your investment decisions should be based on your age, risk tolerance, and long-term goals. Occasionally, we even suggest long-term valuation may drive allocation decisions (the value of this asset class is very low on a historical basis, so I will hold a larger allocation than usual). They should never be based on your idea of what will likely happen in the future. You, like everyone else who tries to predict the future, will get humbled very quickly. As they say in the Navy seals; “Be humble or get humbled”. I can’t think of a better slogan for investors who try to predict the short-term.

Long-answer: There are many factors that play into the market direction, specifically in the short-term, but probably the biggest and most overlooked factor from the average investor is the price (or value). There is an adage in investing that the greatest cure for low prices is low prices.

In February and March when the serious health and economic effects of Covid became apparent, the market was caught off guard by its severity and began a steep and aggressive selloff. Selloffs of this speed and magnitude are scary to the most logical and hardened of investors and money managers. Essentially, the downward draft begins to lose all appearance of logic and becomes emotional as risk managers, money managers, and average investors begin to panic and decide getting out before they lose any more money (regardless of valuation) will stop the pain and allow them to sleep at night. Notice the words chosen in the previous sentence, emotional words driving decision making; nothing logical. While investors are looking to sell to stop the pain of watching their account balances dwindle, company share prices border on absurd. An example I used in March to describe the illogical market movement was The Walt Disney Company. This is a brand name we all know that runs a diverse entertainment empire. Obviously, Covid would have a serious impact on their parks, sports business (they own ESPN), and film production business. However, these are all short-term disruptions, and their foray into digital entertainment and streaming through their Disney+ service is likely to thrive. The stock traded around $150 in January pre-Covid. During the doldrums of the March selloff, the stock had cratered almost 50% to hit a low of around $79/shr. This begs the question of whether a short-term disruption in a part of this company’s business which is almost certain to thrive again in a post-Covid world justify a 50% cut in the valuation of the company. The assertion is ridiculous, and the price was obviously based on fear and panic…not logic. Five months later DIS trades at $130/shr.

This is one small example of what was obvious throughout the stock market. This is also similar to what has happened during past panics, 1929, 1987, 2008, etc. When prices overcorrect on the downside, no amount of bad news can be worse than the fear that the market projected. In fact, when everyone is expecting bad news, bad news tends not to move markets…. but good news will be completely unexpected and drive things much higher. Just like the saying it is darkest before the dawn when investors get what they expect, the low prices are already reflecting that which means the only potential for surprise is on the upside.

Once markets did bottom out in late March the federal reserve and the federal government began to step in and provide support to the economy through fiscal and monetary stimulus. This began to grease the gears of an economy that was screeching to a halt. Although the magnitude of the stimulus is not sustainable for the long term, it is a way to prime the short-term pump of the economy while we figure out the next steps in the fight against the virus.

The combination of low stock prices (intense fear already baked in) and federal stimulus created an environment where the market was compelled to move higher….and move higher it did. Most indexes gained back everything they lost to achieve break-even returns on the year by July (a rally of about 50% depending on the index) and the Nasdaq has achieved a 20% year-to-date gain in this wacky environment.

Now, we stand at a place where valuations, at least for technology, seem irrational on the upside. Large-cap technology continues to climb with almost reckless abandon conjuring shades of a tech bubble in a world still fraught with pandemic risks. Logic has again detached from the market in the short term.

The only advice I can offer during times like this is to be careful of being in a position where your portfolio is aligned with the prevailing sentiment. If everyone thinks the same thing will happen in the future (i.e. the market will fall and stay down for a year or two as happened in March), the opposite is almost certain to happen based purely on valuations. As of today, my fear is the prevailing sentiment that technology can do no wrong. I have had several of our members request we purchase Apple, Facebook, Tesla, Amazon, etc. simply because they have gone up lately and are doing well in a Covid world. This is dangerous thinking. Investments should not be purchased because they have done well in the past and you think the future will bring good things for them. They should be purchased on the merit of their valuation (what am I paying today for future earnings).

Don’t try to predict. Allocate. Adjust your allocation based on your age, risk tolerance, goals, and maybe valuations during times when they become extreme and leave the soothsaying to the fortune-tellers and weathermen.

Filed Under: Retirement Questions Tagged With: covid, covid-19, economic effects, retirement planner, retirement planning, risk tolerance

Primary Sidebar

Zynergy Retirement Planning

  • 732-784-2380
  • 10 NJ-35, Red Bank, NJ 07701

Contact Zynergy Retirement Planning

Schedule a free consultation with a retirement specialist today.

732-784-2380

Footer

Zynergy Retirement Planning

Zynergy Retirement Planning manages more than $110 million in assets for our members with the goal of transparency and unparalleled service.

  • 732-784-2380
  • 10 NJ-35, Red Bank, NJ 07701

Members

  • Member Login
  • About Us
  • Our Services
  • Retirement Enrichment Program
  • Zynergy Cares
  • Contact Us

Retirement Education

  • Dummies Articles
  • 7 Deadly Retirement Sins
  • Zynergy Blog
  • Retirement Q & A
  • Community Scholarship

Get Monthly Retirement Tips

Receive regular news & information vital to your retirement right in your inbox from Zynergy Retirement Planning.

Copyright © 2022 · Zynergy Retirement Planning