You Should Expect A Stock Market Correction in 2020

You Should Expect a Stock Market Correction in 2020

Since late 2018, the stock market has raced higher. Along the way, it has hardly missed a beat. This year looks to be a very interesting year. But we should all be prepared for a reset of sorts. Today on Monday Morning Money, we’ll tell you why you should expect a stock market correction in 2020.

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A Quick Note:  This episode was recorded early last week.  We had no idea that the stock market would drop as rapidly as it did.  We officially entered correction territory last thursday. 

A Normal Part Of Investing

Why should you expect a stock market correction in 2020?  We have no real knowledge of impending doom or anything like that. Sure, we are dealing with the Coronavirus, and last week we saw the Stock Market react harshly to the ongoing news.  In addition, we are also dealing with a lot of political stuff.

In the past 40 years, there has been an annual price decrease of at least 7% a total of 33 times.

The textbooks define an official correction as a 10% decrease in stock prices. That has happened in 21 of the past 40 years—more than half of the time.

The average calendar year price drop since 1980 is 14%. And the stock market has had calendar year declines of that much—or more—15 times.

You Should Expect A STock Market Correction
Click to Enlarge

A Stock Market Correction Doesn't Mean A Bad Year

Of the past 40 calendar years, with all of those annual adjustments, how many times was the stock negative for the year? Seven.

Since 1980, the stock market posted a negative year seven times. That’s about 1 out of every five years. The average total return for stocks over that same time frame was 11.8% per year.

Download The Stock Market Correction Infographic

We created this infographic to show you the frequency and magnitude of annual stock market corrections.  Click on the button below do download your copy.

Expect Stock Market Correction

When You Expect A Stock Market Correction, You Can Make Better Decisions

These interruptions are normal. They are the rule, not the exception. The “reasons” why rarely matter, but how you react to the downturn does.

When we expect a correction, it makes us better investors. We can prepare ourselves for the possible downturn. And that can help us focus on making good decisions in what can be a stressful moment.

Tell yourself, “It’s gonna happen.” When it does, be disciplined and follow your plans. And that will help you avoid the mistakes that could cost you far more in the long run.

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What's On Your Mind?

Do you have a question about what’s happening in the world of finance or investing?  Is there a topic that has you curious?  We’d love to hear from  you.

 We’ll do our best to answer it in a future episode.  To submit your question, fill out the form.  If you prefer, you can send us an email directly.  That email address is neal@flemingwatson.com

Enter Your Question Here

Financial Planning

About the Author

Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors  He typically works with people who are planning for retirement.  Fleming Watson is a Registered Investment Advisory firm located in Marietta Ohio.  Our firm primarily serves Marietta, Parkersburg, Williamstown, St. Marys, Belpre, Vienna and the surrounding communities in Washington and Noble Counties in Ohio and Wood and Pleasants county in West Virginia.

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4 Things You Can Do Right Now to Improve Your Retirement

4 Things You Can Do Right Now To Improve Your Retirement

Today, we share 4 things you can do right now to improve your retirement.  Click below to listen.

Watch: 4 Things You Can Do Right Now To Improve Your Retirement.

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Start Now! Steps to Improve Your Retirement.

There is plenty written about the retirement crisis in America. But you can make a positive impact on your own situation. Here are 4 things you can do right now to improve your retirement.

4 Things To Improve Your Retirement

Start Saving

Time is your greatest resource when saving for retirement. The earlier in life you start, the longer you enjoy the benefits of compounded returns.

There is a saying, “The best time to plant an oak tree was 20 years ago. The next best time to plant one is right now.”

You can’t make up for the lost time, but you make saving a priority now. Look at your budget. See what changes you can make. Figure out how you can start putting money in a 401K or IRA. Don’t waste any more time.

Improve Your Retirement 4 Things

Save More

How much you save for retirement is critical. Many people suggest you should save 10% of your pay for retirement. Think about increasing that to 15%.

It means you’ll have 50% more in your nest egg. In dollar terms, if saving 10% of your pay results in a retirement savings of $500,000, saving 15% would result in $750,000. That’s a big difference.

4 Things Retirement

Plan To Work Longer

Retiring early can mean big discounts to Social Security benefits. It also gives you fewer years to save and benefit from compounded returns.

Waiting to retire means the discounts to Social Security get smaller. And if you delay long enough, your Social Security benefits will actually increase.

Improve Retirement 4 Things

Pursue Growth

We all know the stock market can be a wild place. There are plenty of up years, and occasionally, a big down year. But over time, stocks have helped many people improve their retirement picture.

Don’t be afraid of the stock market. It can help improve your returns over time. And that means a better retirement.

You can make your retirement better. Start with these 4 things. If you need some help, talk to a financial planner.

What's On Your Mind?

Do you have a question about what’s happening in the world of finance or investing?  Is there a topic that has you curious?  We’d love to hear from  you.

 We’ll do our best to answer it in a future episode.  To submit your question, fill out the form.  If you prefer, you can send us an email directly.  That email address is neal@flemingwatson.com

Enter Your Question Here

Financial Planning

About the Author

Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors  He typically works with people who are planning for retirement.  Fleming Watson is a Registered Investment Advisory firm located in Marietta Ohio.  Our firm primarily serves Marietta, Parkersburg, Williamstown, St. Marys, Belpre, Vienna and the surrounding communities in Washington and Noble Counties in Ohio and Wood and Pleasants county in West Virginia.

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Is the Coronavirus a Long-Term Threat to Your Retirement Savings?

Is The Coronavirus a Long-Term Threat to Your Retirement Savings?

Is the Coronavirus a long-term threat to your retirement savings?  This question weighs on the minds of many as the news dominates the headlines.  We try to add some perspective in this week’s episode of Monday Morning Money.

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The Coronavirus is a Big Deal

According to the World Health Organization, the Coronavirus outbreak has reached pandemic levels. Over 20,000 have contracted it.

At times, the stock markets have reacted harshly to the news. On January 31, The Dow dropped by more than 600 points. It was the biggest drop in months, and it was easy to blame the virus for the fall.

The Big Question: Is the Coronavirus a Long-Term Threat to your Retirement Savings?

This isn’t the first major viral epidemic we have seen. In 2003 it was SARS. The bird-flu hit the headlines in 2005. We saw an outbreak of the swine flu in 2009. And then we faced the Ebola scare in 2014. All had their own short-term impact on the financial markets.

This outbreak will have a short-term impact as well. But, history tells us the hype will likely be far worse than the actual impact to the world’s economy.

Always a Reason for Doom and Gloom

There is never a shortage of excuses to sell stocks. When you look back over the past 20 years or so, you can find many reasons for doom and gloom. We have seen virus outbreaks. Lehman Brothers and General Motors filed for bankruptcy. We endured government shutdowns and massive one day drops in stock prices. And for some, the election of President Trump was their reason to abandon stocks.

But the impact of any of those excuses was temporary.

The SARS virus first made headlines in February 2003. Now 17 years later, the stock market has increased by 441%. That includes the returns from dividends.

Coronavirus long-term threat to retirement savings
Click to enlarge

Short-Term Interruptions

Our experience shows things like the Coronoavirus outbreak are short-term interruptions to the long-term growth of stocks. So the impact to your savings from this outbreak will most likely be short lived.

But don’t worry, the financial media will have another reason for doom and gloom shortly.

What's On Your Mind?

Do you have a question about what’s happening in the world of finance or investing?  Is there a topic that has you curious?  We’d love to hear from  you.

 We’ll do our best to answer it in a future episode.  To submit your question, fill out the form.  If you prefer, you can send us an email directly.  That email address is neal@flemingwatson.com

Enter Your Question Here

Financial Planning

About the Author

Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors  He typically works with people who are planning for retirement.  Fleming Watson is a Registered Investment Advisory firm located in Marietta Ohio.  Our firm primarily serves Marietta, Parkersburg, Williamstown, St. Marys, Belpre, Vienna and the surrounding communities in Washington and Noble Counties in Ohio and Wood and Pleasants county in West Virginia.

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Should You Buy Stocks At the Top of the Market?

Should You Buy Stocks at the Top of the Market?

Should you buy stocks at the top of the market?  This is a question submitted by a listener.  Click below to hear our answer.

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Answering a Listener Question

John asks, “With the stock market so close to all-time highs, should I buy stocks, or should I wait?” 

The stock market is very close to all-time highs. We also keep hearing how this is—arguably—the longest-running bull market in history. And at some point, there will be some sort of major drop.

So, should you buy stocks at the top of the market?

It Can Be A Long Way Down

Here is the root of John’s concern. Nobody wants to be the person with perfectly imperfect timing.  This means you buy at the market’s high right before a bear market.  It can be painful. 

The last four major declines were

  • -49%(2000-2003),
  • -57%(2007-2009),
  • -19.4% (2011), and
  • -19.8% (2018).

Seeing your investment drop significantly and quickly isn’t exactly a good time.  But the bigger question we should ask is:

What would have happened if you had bought stocks right before the last 4 bear markets?

Buy Stocks at The top
Click to Enlarge

The Dot Com Bust (2000-2003)

Buying at the top in March of 2000, and holding it until the end of last year, your average return would have been 6% per year. And remember, you would have gone through four total bear markets in those two decades, including the worst one since the great depression.

The Great Recession

The next “top” was in October 2007. If you bought then, by the end of 2019, your average annual return would have been 8.% per year.

Buy Stocks Top
Click to Enlarge
Top of the market
Click to Enlarge

Spring 2011

 Buying the top in the spring of 2011 resulted in an average of return of 12% per year over those 8 plus years.

4th Quarter 2018

The last one was in the fourth quarter of 2018. Buying the top in late September 2018 resulted in a 10% return at the end of last year.

Market Top BUy Stocks
Click to Enlarge

Those returns won’t be as good as someone who was able to avoid those bear markets. But the number of people who can correctly guess those events are few and far between.

If Not Now, When?

The next thing you need to consider: if you don’t buy now, when will you? Do you use a rule or your “gut feeling?”

Some people will set a rule. If the market drops 10 or 15% they’ll buy. But what do you do if prices don’t drop far enough? If your target is 15% lower, and the market only drops 12% before it turns around, you miss opportunities.

Or do you use the “gut feeling” method? You’ll buy when it feels right.

When stocks are declining, the prevailing mood will tell you it’s going to get worse before it gets better. Buying low might be the right thing, but it will also be the hardest thing to do.

Lessons Learned

Here’s what I’ve learned over the past 24 years.  If you have the right mindset, the best time to buy stocks is when you have the money. On March 24, 2000, the closing high for the S&P 500 was 1527.  Four bears and twenty years later, the index closed at 3230.  And two of those bears two are two of the worst we’ve ever seen.

Chances are, and I believe this, we are going to see much higher highs in the future.  Trying to miss the trouble will likely mean you end up missing the returns you want.

What's On Your Mind?

This was a great question, and we are glad John sent it to us.  Do you have a question? We try to answer it on a future episode of Monday Morning Money.

To submit your question, fill out the form.  If you prefer, you can send us an email directly.  That email address is neal@flemingwatson.com

Enter Your Question Here

Financial Planning

About the Author

Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors  He typically works with people who are planning for retirement.  Fleming Watson is a Registered Investment Advisory firm located in Marietta Ohio.  Our firm primarily serves Marietta, Parkersburg, Williamstown, St. Marys, Belpre, Vienna and the surrounding communities in Washington and Noble Counties in Ohio and Wood and Pleasants county in West Virginia.

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Avoid These 4 Big 401k Mistakes in 2020

Avoid These 4 Big 401k Mistakes in 2020

One of the biggest factors in your long-term financial success is avoiding the big mistakes. Unfortunately, we see many of the same common errors that—over a person’s career—can cost thousands if not hundreds of thousands of dollars. Try to avoid these 4 big mistakes in your 401k in 2020

Watch: Avoid These 4 Big 401k Mistakes in 2020

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Mistake 1: Not Maximizing Your Match

Many employers will match your 401k contribution.  If you put money in your account, your employer will too.  We typically see that amount range between 3% and 6% of your pay. 

Unfortunately, we see people who won’t maximize their employer’s match.  Not only are you not receiving all the pay you should, the long-term impact on your nest egg can be huge.    

Mistake 2: Not Saving Enough

Most financial planners suggest you should try to save between 10-15% of your pay for your future. In fact, the amount you save is the biggest factor in your long-term success.

Unfortunately, we see people who limit their savings level well below that. Often times, people will cap their savings in their 401(k) at the point where they maximize the employer match. For most of us, this probably won’t be enough to have the type of retirement we want.

Mistake 3: Not Pursuing Growth

A Nobel Prize winning economist once did a study that showed financial losses feel twice as bad as financial gains feel good. As a result, many people get more conservative with their savings than they should. This means they don’t put enough money in stocks.

Not being aggressive enough can lower your returns over time.  This actually adds more risk to your long-term plans.

Mistake 4: Withdrawing Money From Your 401k

Whether you change jobs or take an in-service distribution, withdrawing money from your 401k gets very expensive.

Most times we see this when people change jobs. Instead of rolling their balance to an IRA or their new employer’s plan, they withdraw the money. This results in taxes, early withdrawal penalties, and the loss of future compounded growth.

If your plan allows for in-service distributions, the costs will be similar.  Most of those distributions will be taxed and penalized.  The penalty applies when you are under age 59 ½.

How Much Will These Mistakes Cost?

How much will these mistakes cost you?  The numbers can be shocking.  The longer you have until retirement, the bigger the cost.  We have a special webinar where we illustrate the potential cost of these 4 mistakes. Click on the button to watch.

What's On Your Mind?

Do you have a question about what’s happening in the world of finance or investing?  Is there a topic that has you curious?  We’d love to hear from  you.

 We’ll do our best to answer it in a future episode.  To submit your question, fill out the form.  If you prefer, you can send us an email directly.  That email address is neal@flemingwatson.com

Enter Your Question Here

Financial Planning

About the Author

Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors  He typically works with people who are planning for retirement.  Fleming Watson is a Registered Investment Advisory firm located in Marietta Ohio.  Our firm primarily serves Marietta, Parkersburg, Williamstown, St. Marys, Belpre, Vienna and the surrounding communities in Washington and Noble Counties in Ohio and Wood and Pleasants county in West Virginia.

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What Happens to the Stock Market in Election Years

In case you hadn’t heard, 2020 is a big election year. In fact, it is maybe one of the most polarized and heated presidential elections in quite some time.  And we don’t even know who’s running yet. It will likely have an impact on the investment world too. What happens to the stock market in election years?

We’ll take a look back at election years since 1948 and see if that offers any insight into what we could expect in 2020.

Watch: What Happens to the Stock Market in Election Years?

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History doesn’t always repeat itself, but it often rhymes. You can look at certain historical trends and form some fairly realistic expectations. For example, a year ago we looked at what happens the year after a down year in stocks.  In this case, the trend proved to be a solid guide for this year.

2020 is an election year. We thought it would be interesting to look at all the election years after World War II. What happens to the stock market in election years? We found a couple of interesting trends.

Trend 1: Incumbents Are Tough to Beat

The first one has nothing to do with stocks and investing. There have been 18 presidential elections since the end of World War II. It started with Truman’s win over Thomas Dewey in 1948. Ten of those elections featured an incumbent president running against a challenger. In seven of those 10, the incumbent won.

The losers:

  • Gerald Ford lost to Jimmy Carter in 1976.
  • Jimmy Carter lost to Ronald Reagan in 1980, and
  • George H. W. Bush lost to Bill Clinton in 1992.

Trend 2: Stocks Have Done Well in Presidential Election Years

What did the stock market do in all those election years?

  • The stock market posted gains in 16 of those 18 years. 
  • It also saw declines in two of those years.
  • The best election year was 1980 when the S&P 500 improved by more than 32%. And this includes the return from dividends. 
  • 11 of the 16 positive years, the stock market posted double-digit gains.
  • In 2008, the stock market was down 37%.  It was the worst return in an election year.
  • The other negative year was in 2000. That year the stock market decreased 9.1%
  • On average, the compounded annual return for these 18 election years is 8.8%
Click to Enlarge the Chart.

Forming Expectations

What does this mean for 2020? History tells us we should expect a positive year.  In addition, we currently have low unemployment, projected earnings growth, and a growing economy.  All of which would support the expectation for a positive year.

But things don’t always follow historical trends and the supporting data can change without notice.  The added drama of politics will make things a bit more turbulent and interesting in 2020. 

What's On Your Mind?

Do you have a question about what’s happening in the world of finance or investing?  Is there a topic that has you curious?  We’d love to hear from  you.

 We’ll do our best to answer it in a future episode.  To submit your question, fill out the form.  If you prefer, you can send us an email directly.  That email address is neal@flemingwatson.com

Enter Your Question Here

Financial Planning

About the Author

Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors  He typically works with people who are planning for retirement.  Fleming Watson is a Registered Investment Advisory firm located in Marietta Ohio.  Our firm primarily serves Marietta, Parkersburg, Williamstown, St. Marys, Belpre, Vienna and the surrounding communities in Washington and Noble Counties in Ohio and Wood and Pleasants county in West Virginia.

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Were The Predictions Right?

With two weeks remaining in 2019, we review a couple of blog posts from 2018. Both were looking ahead to what might happen this year.  Were the predictions right?  Let’s take a look.

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Listen Now: Title Here

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After a Down Year for Stocks, What Happens Next?

Since 1950, there have only been 15 years when the S&P 500 finished underwater including 2018.  With the concerns at the time, most people were wondering if we would see another negative year in 2019. 

We went digging into the numbers to see how often the stock market posted back-to-back negative years, to see what we should expect.

The data showed in the 14 previous events, the stock market finished higher the next year 11 times. And not just positive a little bit. The average gain following a down year was over 17%

Were The Predictions Right

Was the Prediction Right?

It looks like we will be able to say the next year was positive 12 out of 15—barring a major meltdown in the next couple of weeks.  It also looks like the average gain the year after the down year will go up as well.

The Wall Street Crystal Ball

We also looked at how well the big investment firms could predict the future. In fact we even bought our own crystal ball to see if we could get in on the act. 

We showed 12 predictions from the some of the biggest names on Wall Street.  All 12 predicted gains for the stock market.  Here are some of the highlights.

  • The most pessimistic prediction for stocks was a 3% gain.
  • 5 of the 12 predicted single digit returns for the S&P 500, while 7 forecasted double digit gains.
  • 3 of these firms predicted returns of 20% or more.
  • The average guess for all 12 was a positive return of 14%.
  • And the most optimistic prediction was for a 26% gain.
blank

Were the Predictions Right?

With just two weeks to go, The S&P 500 is up well over 26% for the year. At least crystal balls at a handful of these firms were close.  That’s a pretty big improvement over 2018’s predictions.

What's On Your Mind?

Do you have a question about what’s happening in the world of finance or investing?  Is there a topic that has you curious?  We’d love to hear from  you.

 We’ll do our best to answer it in a future episode.  To submit your question, fill out the form.  If you prefer, you can send us an email directly.  That email address is neal@flemingwatson.com

Enter Your Question Here

Financial Planning

About the Author

Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors  He typically works with people who are planning for retirement.  Fleming Watson is a Registered Investment Advisory firm located in Marietta Ohio.  Our firm primarily serves Marietta, Parkersburg, Williamstown, St. Marys, Belpre, Vienna and the surrounding communities in Washington and Noble Counties in Ohio and Wood and Pleasants county in West Virginia.

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Stocks Climb A Wall of Worry

Stocks climb a wall of worry.

What does this mean? 

Today, we talk about:

  • The news always seems bad
  • Recessions, trade wars and now impeachment dominate the headlines.
  • But the stock market? What has it done.

We’ll talk about it on this episode of Monday Morning Money.

Watch: Stocks Climb A Wall Of Worry

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We would love to answer your question on a future episode

Do you have a question about money or personal finance? Submit your question using the form below or send an email to neal@flemingwatson.com

Stocks climb a wall of worry.

What does this mean? Think about all the stuff which has circulated in the headlines over the past year.

A Looming Recession

We continue to deal with the threat of a recession. A major economic slow down can lead to higher unemployment. It can also impact businesses big and small. In some cases, a recession can mean a bear market.

The talk of a recession tends to darken the mood though, and people’s attitudes tend to sour on things like stocks.

Trade Wars

We are still in the midst of a trade war with China. Something many experts feel could contribute to our economic woes. Both countries are taxing goods imported from the other. This serves to drive prices higher for the consumer.

Officials from both countries continue to talk. Unfortunately, nothing has happened, yet.

Impeachment

And now we can add the possibility of impeachment to the list of big things affecting the mindset of the American public. Regardless of where you stand on this issue, it casts a dark cloud over the future.

What the impact will be? Nobody really knows. Since the 1920’s this has only happened twice, with presidents Nixon and Clinton. Nixon’s problems started in late 1972.  The stock market in 1973 and 74 declined nearly 50%.

Clinton’s problems happened in 1997 and 1998.  In both years, the stock market was up over 20%.

So we don’t have a lot of data to help guide us on what to expect.

Wall of Worry
Stocks Climb A Wall

With all the uncertainty, the dismal news cycle, and overwhelming pessimism, what has the stock market done?

Last Monday – the 28th –  the S&P 500 set a new all-time high.

Stocks Climb a Wall of Worry

At that time the popular large-cap index was up over 23% on a total return basis for the year.

Climb a Wall

On the same day, The Dow Jones Industrial Average closed to within less than 1% of it’s all-time high.  

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This is what it means when people say, “Stocks climb a wall of worry.” The doom and gloom surrounds us. In fact, it is hard to imagine there is anything good happening in the world.  But yet, the stock market just quietly marches higher.

Beneath the noise are great businesses. Companies who find ways to improve profits and deliver value to their shareholders. And sometimes it leads to a pleasant surprise waiting for us when the dust settles.

Stay Informed.

Monday Morning Money is a podcast talking about current events which  impact your bottom line.  

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Financial Planning

About the Author

Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors  He typically works with people who are planning for retirement.  Fleming Watson is a Registered Investment Advisory firm located in Marietta Ohio.  Our firm primarily serves Marietta, Parkersburg, Williamstown, St. Marys, Belpre, Vienna and the surrounding communities in Washington and Noble Counties in Ohio and Wood and Pleasants county in West Virginia.

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Why Do People Run Out of Money During Retirement?

Nearly Half of Americans say running out of money is their primary concern.  So, why do people run out of money during retirement?  

In this episode we will discuss:

  • There is almost never just one singular reason, it is a combination of factors.
  • A major stock market decline is one factor, but it takes more than a bear market to derail retirement.
  • We identify four of the other common factors which lead to disaster.

Watch Now: Why Do People Run Out of Money During Retirement?

Each Episode of Monday Morning Money is also broadcast on Local Radio, WMOA (1490 AM and 101.3 FM).  You can hear it at 11:07 every Monday. 

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In addition, you can also hear this episode on our YouTube Channel.  Please take a moment to subscribe, as it helps our analytics and improves our reach.  This also appears on Facebook and LinkedIn.  

Audio Only Version: Click Here

What's On Your Mind?

Do you have a question about what’s happening in the world of finance or investing?  Is there a topic that has you curious?  We’d love to hear from  you.

 We’ll do our best to answer it in a future episode.  To submit your question, fill out the form.  If you prefer, you can send us an email directly.  That email address is neal@flemingwatson.com

Enter Your Question Here

Last week AARP published an article. It had the results of a survey conducted by three organizations. They asked workers about retirement. Here are some key findings:

  • Only 36% of Americans were very confident they could retire comfortably.
  • 44% said declining health as a major concern.
  • 49% listed running out of money as their primary concern.

So, Why Do People Run Out of money During Retirement

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The first contributing factor is a major bear market. That includes one like we saw in the great financial crisis or the dot com bust. We could define this as a period where stocks decline 30% or more. Fortunately, these are not a frequent occurrence. Since the 1960’s, it has happened five times.

Many want you to believe bear markets are the sole reason people run out of money. But, that’s not usually the case. There has to be something else at play.  Sometimes those other factors can be more significant.

The Other Contributing Factors To Running Out of Money in Retirement

Run out of money during retirement spending

Let’s start with how much you spend. There are plenty of debates about what constitutes a safe withdrawal rate.  If you talk to ten different financial planners, you might find ten different answers. But you can reach a point where you are taking too much income from your nest egg.  That dramatically increases your risk of running out of money.

Why do people run out of money

The next is when the bad year—or years—happen early in your retirement. There have been many studies about sequence of returns risk. This data shows bad returns early in a person’s retirement can create big challenges.

Reasons 4 and 5

Click to enlarge.

The fourth contributing factor: people get too aggressive with their allocation. The better the stock market does, the more people want to pursue those returns. They often get more aggressive near the top of a market cycle. Growth is important. Remember, increasing your allocation to stocks to pursue returns increases your risk.

The fifth common element is selling low. It is hard to stick to your long term plan when you see your nest egg shrink. The declines can be extreme. Remember this. In every prior instance of a major market crash, stocks have recovered their losses and set new highs. If you sell your stocks at low points, it makes it impossible to participate in the recovery.

Rarely does “one thing” cause a financial disaster for retirement. Creating a plan can help you address these factors and avoid a potential disaster.

Stay Informed.

Monday Morning Money is a podcast talking about current events which  impact your bottom line.  

If you would like to be notified when a new episode is released, sign up for our mailing list.  Just complete the form.

Join Our List Today!

* indicates required
Financial Planning

Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors  He typically works with people who are planning for retirement.  Fleming Watson is a Registered Investment Advisory firm located in Marietta Ohio.  Our firm primarily serves Marietta, Parkersburg, Williamstown, St. Marys, Belpre, Vienna and the surrounding communities in Washington and Noble Counties in Ohio and Wood and Pleasants county in West Virginia.

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Not As Bad As It Seems

In the investing world, things are often not as bad as they seem. The data doesn’t always match the headlines.  

Today we talk about:

  • August was not good, but was it really bad? It felt really bad.
  • The worst month for stocks (so far) this year is…
  • Have we even had a correction in stocks yet?
  • Don’t look now, but the US stock market is having a really good year.
  • So is everything else.
  • Things also aren’t as good as they look either.
  • The fourth quarter is the “money quarter” for the stock market.

Monday Morning Money: Not As Bad As It Seems

Each Episode of Monday Morning Money is also broadcast on Local Radio, WMOA (1490 AM and 101.3 FM).  You can hear it at 11:07 every Monday. 

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In addition, you can also hear this episode on our YouTube Channel.  Please take a moment to subscribe, as it helps our analytics and improves our reach.  This also appears on Facebook and LinkedIn.  

Stay Informed.

Monday Morning Money is a podcast talking about current events which  impact your bottom line.  

If you would like to be notified when a new episode is released, sign up for our mailing list.  Just complete the form.

Join Our List Today!

* indicates required

August Was Bad, But Not As Bad As It Seems

I’m a big Ohio State Football fan. I admire Jim Tressel who was the head coach for one of the more successful periods in school history. One of the things I can remember him saying in his press conferences, was “things are rarely as good or as bad as they seem.”

You can say the same thing about the investment markets. August seemed like an awful month. We had “headliner” down days of 767, 623, and 800 points. We were bombarded with the negative news. The trade war with china, the inverted yield curve, and the looming recession all dominated the headlines.

It felt like August was a dismal month. If I didn’t keep score, I would have guessed things were far worse than they were. On a total return basis, the stock market, as measured by the S&P 500, was down a little more than a percent and a half. It was not as bad as it seemed.

In fact, August wasn’t even the worst month this year. That distinction belongs to May when stocks declined more than 6%.

(Click image to enlarge)

The Headlines Make it Sound Bad, But It's Not As Bad As It Seems

If you only follow the headlines and sound bites, you may think we’ve had a difficult year. The maximum draw down in stock prices this year is less than 7%. That doesn’t even classify as the textbook definition of a correction. A correction is a 10% decrease in prices. And it is half of the average correction we have seen since 1980.

The endless parade of pessimism makes us think things are worse than they seem. August was not a good month. But, The S&P 500, which is the primary index we use to keep score, is up over 18% on a total return basis through the end of August. 

(Click images to enlarge)

Most of the Major Asset Classes Are Doing Well

In fact, most of the major asset classes we follow have had an outstanding year—so far. Bonds are doing well. Remember last week we talked about the relationship between yield and price. When yields fall, bonds prices go up. And yields continued to fall.

Gold is up more than 18% for the year. And Real Estate is up more than 27% for the year. International stocks are also up for the year.

(Click image to enlarge)

An Interesting Nugget

Over the past 25 years, October has been the 3rd best month for stocks. November has been the 2nd best. And December has been the 5th best. Combined, the fourth quarter has generated an annualized return of 4.3% per year.

Over the past 25 years, the stock market has averaged a gain of 8.9% per year. Nearly half of the return for the last quarter century was generated in the fourth quarter.

(click image to enlarge)

What's On Your Mind?

Do you have a question about what’s happening in the world of finance or investing?  Is there a topic that has you curious?  We’d love to hear from  you.

 We’ll do our best to answer it in a future episode.  To submit your question, fill out the form.  If you prefer, you can send us an email directly.  That email address is neal@flemingwatson.com

Enter Your Question Here

Financial Planning

Neal Watson is a Certified Financial Planner™ Professional and a Financial Advisor with Fleming Watson Financial Advisors  He typically works with people who are planning for retirement.  Fleming Watson is a Registered Investment Advisory firm located in Marietta Ohio.  Our firm primarily serves Marietta, Parkersburg, Williamstown, St. Marys, Belpre, Vienna and the surrounding communities in Washington and Noble Counties in Ohio and Wood and Pleasants county in West Virginia.

Our Most Recent Videos

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Watch Now

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Watch Now

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