What You NEED TO KNOW About Retiring During a Market Crash

in this video we discuss what you need to know about retiring during a market crash coming up next on holy schmidt holy schmidt gone are the days where we can count on our cash flow in retirement with something called a defined pension plan or defined payment plan this is something that our grandparents had back in the day if you have one of those count your lucky stars and if you have one of those that is inflation adjusted well the universe is on your side for the rest of us we need to know what to do during a market downturn and that's what this video is all about but before we begin please make sure you click subscribe and turn on notifications so that you get alerted the next time i post a video there's a lot going on in the world right now and i work very hard to get what's out there and here for you all right let's jump into it this video will give you some of the big ideas that have stood the test of time and even though it doesn't feel like it for you right now we have been here before in fact many times before in the history of this country in the history of the world in fact let's start off with the obvious acknowledgement of how you're feeling and also an acknowledgement of what's going on when markets become destabilized it can put a damper on years even decades of retirement planning do you remember when your 401k plan representative came to your place of employment and asked you the following question what is your risk tolerance low medium or high i don't know about you but for me when the question came up i was in my early 20s and i checked hi let me know what your choice was in the comments section below and also how you're feeling today i'll remind you at the end so you don't need to stop the video to do this now but i want you to feel better about that choice because i think you'll find that a lot of people made the same choice that you did and the only way to tell is to read the comments all right back to the video this question by the way is a great place to start because if the world fell apart tomorrow the back half of the year and the year after that would you panic sell or would you have the fortitude to stick it out the answer to this question is an important one and actually frames the rest of the discussion we have here no matter what your answer the number one thing to do right now and if things get worse in the future is don't panic panic is not your friend panic without a plan means that you're swinging blindly and trying to hit something in the mist and you have no idea what you're swinging at and generally that means panic selling sometimes the worst thing you can do in fact most of the time the worst thing you can do is to panic sell because you think the things are going to get a lot worse don't get me wrong there are times to sell your assets and there are times to hold your assets and maybe now is the time to sell some of your assets but you need to think this through logically and methodically before you do and it's hard to stay balanced and focused when there's a lot of shock information out there i read one recently that said that right now you should have two to four years of cash on hand to weather the storm this begs the obvious question where was that advice six months ago when the markets were riding high and you could actually sell your investments and not take a big loss on what you have in your portfolio the advice back then was three to six months maybe a year if you're ultra conservative now it's two to four years how do you bridge the gap between three months and four years without selling something below market headlines like this scare the heck out of people and they sell a lot of magazines and newspapers but hypothetically let's just say that you followed that advice and you sold four years worth of cash and you put it in your savings account and inflation is running at eight percent what happens to that four years worth of cash by the end of the four years it becomes more like three years worth of cash or three in a bit so be very diligent about how you withdraw your money because frankly just selling wildly is not the answer and if you're watching this video and you're in retirement which is most of you right now makes sense to sell less of your assets not more because you are selling at a depressed price if the market is down 20 you're selling 20 percent more total number of shares 20 more units if you're talking about a mutual fund or a limited partnership the point is that that seed that unit that share that element in your portfolio goes up and down in value and when it's down you need to sell more of them to get the cash flow that you need to pay the big bills the better strategy is to look for ways to reduce your spending it's not forever but it is right now if you had sold your portfolio in 2009 or 2010 when the market crashed you would have sold at 60 or 70 cents on the dollar only to see that rebound a few years later and take off and double in value more than double frankly over the next eight to ten years if you're worried about the decline in your portfolio now might not be the time to take the bucket list vacation to india to dine in the russian tea room on 57th street in new york city or to fly business class to the family reunion we all have things that we want and all have things that we need if you're lucky in life you'll get the things that you want and the things that you need but right now focus on the things that you need and the s-curve for those of you who know what that is is a great place to start if you don't know what the s-curve is i'll put a link in the description to the s-curve it's on my website it's called the schmidt curve and it talks about basically the difference between needs and wants in retirement and how to satisfy as much of those they give you the best utility or the biggest bang for your buck at the lowest spend for the the bang so to speak the next point is to look for other cash solutions if the market is dropping and inflation is raging getting creative with your cash flow is pretty important if for example you can buy something today and pay it out over three payments of say three six or even twelve months basically you've taken the inflation element and you've put it on somebody else don't get me wrong you can't actually take that cash and spend it and not have it available for the purchase later but you can in fact move your cash around so that you can spend your cash today on what you need today in your cash in the future on what you need in the future and not confuse the two if you have a great mortgage paying off your mortgage early may not make a lot of sense right now if you're paying three or four percent on your mortgage and inflation is running at eight or nine percent well the value of the mortgage to the lender is going down by eight to nine percent per year this is particularly true if you have to sell assets at the press prices to pay more on your mortgage than the required minimum many financial advisors will tell you in this scenario it's better to keep the cash and use it to pay your bills or to keep the cash and use it to reinvest or stay invested as the case may be and we are in inflationary times not a lot of things are on sale right now that is because there are more buyers and sellers when there are more buyers and sellers prices go up if there are more sellers and buyers prices go down think about fuel when russian oil was cut off the same number of people still needed to get to work to get to their family vacations or to get to a friend's house by car yet there wasn't as much fuel so you have basically less supply with consistent demand and prices go up however if you have the ability to buy something today and lock in prices for the next 12 months it might make sense to do so i'll give you a great example right now it's june almost july of 2022. there are things that you buy in the spring that you'll definitely need in 2023 that you could buy now for a lot less money this is because vendors have cash flow issues just like everybody else and if they have inventory that hasn't sold well they're going to sell it to get the cash flow particularly now and redeploy it for something else think about things like garden supplies heating oil if you heat your home with heating oil a long-term contract with your heating oil provider in june might get you a better result than if you wait until september or october when winter starts to approach but you only do this buying early or locking a long-term contract if you are sure you're going to use the product or service the worst thing that you can do is to agree to buy a product or service at a price and that price is locked in for the next 12 months and you find that you are obligated to buy it but you have no use for it now if you must sell your investments and i recommend that you talk to a financial planner before you do this but if you must sell your investments this is the order that you should consider first dividends and interest as they're coming out instead of reinvesting them use those as cash flow if you must sell investments focus on low volatility investments like treasury bills or treasury notes of one or two years those shorter duration notes are going to retain most of their principal even when interest rates are rising maturing cds are a wonderful place to access cash because you won't have lost your principal on those you've just received less interest than you would or could today and if you must sell investments sell the ones that you would have sold anyway and look at ways to cultivate your tax losses it's impossible to say what the future holds but minimize selling during a downturn is important to make sure that you have the assets available for you for the long term even small reductions in the amount you withdraw from your savings or your investments will go a long way to helping you in the long run all of this as i mentioned at the beginning is predicated on you speaking with a qualified financial planner who can look at your specific situation dispassionately and help you design a strategy that's right for you also remember to fill out in the comments section below what you chose when you implemented your 401k low medium or high risk tolerance and how you feel today even if that is the choice that you still have today how you feel today i think you'll find that a lot of people will have a big mismatch between those two just put in the comments section below the world is a strange place right now and i work very hard to get what's out there in here for you so please consider clicking subscribe and clicking notifications so that you get alerted when i post a video i post about twice a week also check out this video on several reasons why you should not repay your mortgage early in this day and age this is jeff schmidt thanks for watching

Channel: Holy Schmidt!

Views: 90,151

Keywords: retiring in a down market, retiring during a market crash, what to do if you retired in 2022, retirement planning, stock market crash, 2022 market crash, retirement planning at 60, retirement planning at 55, retirement planning at 65, bear market, bear market in retirement, stock market

Id: 4RWVzOHnE3k

Length: 10min 40sec (640 seconds)

Published: Fri Jul 01 2022