Volitility is Not Fake News

May 9, 2018

If you are like many retired Americans dependent entirely on investments to meet your living expenses, you need to ask yourself if the volatility in the markets is likely to continue throughout the President's first term. With the tax bill the government is running on empty with increasing deficits and rising debt driving interest rates higher.  How will the markets react?

 

A number of you actually are taking automatic withdrawals monthly, liquidating shares of funds when the market is down and buying them when they go up.  Its one thing if the market was going in one direction to figure out how to reinvest or withdraw funds, but volatility affects accounts under distribution disproportionately, and that problem, sequence risk,  is exacerbated by monthly withdrawals. 

 

This is a time to be realistic about your portfolio; will you risk a 20% loss in return for  6-10% upside? Managing your withdrawals is every bit as important as how to allocate the investment.  In periods of high volatility, forgoing distributions to weather the storm and moving into stable assets is the ideal strategy.  You need to build a two year reserve, 1 year's distributions, and actively manage withdrawals to maintain long-term sustainability.  Get off the automatic withdrawals!

 

 

 

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Frederick W Rosenberg JD

973-761-8866

27 Village Green Ct
South Orange, NJ 07079
USA

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