Weekly Update: May 23: Are you focused on the long term?

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By Debra Taylor, CPA/PFS, JD, CDFA™


Dear Friends,
When the markets correct, it can be confusing and even frustrating. There are, however, opportunities in every market, if you move boldly and with thought. With that being said, below we review the Nine Key Opportunities that could be (or are) available for you.

1. Make your IRA and retirement plan contributions. Why wait until the end of the year when you can make these contributions at a market low?
2. Always consider Roth conversions as a market decline essentially provides a tax break now on top of the many other amazing benefits of a Roth IRA. Don’t forget Back Door Roth conversions, as well.
3.  Consider your cash flow. Slow down (or stop) distributions until the market rehabilitates. This is where a solid Plan B can come in — look to alternate sources of income, or open a home equity line of credit as interest rates are still very low. We also offer collateralized loans at very reasonable rates based on your investment accounts. Also, consider cutting back expenses for the time being. And confirm that your liquidity is still appropriate and that your emergency fund is in place.
4. If you were thinking of retiring, perhaps consider delaying that retirement until the market is stabilized. Drawing down your portfolio at this time may slow the growth of your assets.
5.   Consider investing that cash that is sitting on the sidelines. We will only know after the fact whether the bottom is here, but there is definitely a bottoming process going on, so perhaps consider dollar-cost averaging into the market.
6.  Consider rebalancing your portfolio, whether that means selling overvalued and less desirable positions or rotating to areas that you were previously hesitant to consider, such as commodities or cyclical stocks. Also, review your hedging strategies to ensure they still make sense.
7.  With so many broad-based losses, consider tax loss trading as almost every portfolio has plenty of losses, whether it is in bonds or equities. However, don’t run afoul of the wash sale rule when selling equities.
8. Consider getting more aggressive with your asset allocation strategy if you have a long-term time horizon and the proper temperament to handle the volatile markets.
9.  Review gifting strategies in light of the declining market. Some strategies make more sense when assets are depressed, such as GRATs, CLATs, IDGTs, and private annuities. Also review the impact of declining markets on an estate if in probate and distributing assets.
If any items listed above are of interest to you, please reach out to us, and we will discuss your specific situation and what strategy makes the most sense for you.
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