Starting a new year always means that we’re leaving behind an old one. This time, we are leaving behind 2020, a year rife with unexpected and uncontrollable events, including unprecedented public health challenges, as well as an emotionally charged country, typical of a U.S. Presidential election year. It was also a year of remarkable scientific achievement as scientists around the world engaged in a race against time to find a vaccine for the Covid-19.
All of these events shape and mold the market conditions on which many of us depend for our future savings. These events that move the markets are out of individual investors’ control. However, there are many aspects of investing that are specific to an investor’s situation and within their command.
To assess your individual investment situation, begin by addressing these questions:
- What is my time horizon? Most of us have savings in a retirement account and plan to retire at a certain age. If your time horizon has changed, it may have implications for the risk profile of your retirement portfolio. As a rule of thumb, a shorter time horizon may mean a more conservative allocation, and a longer time horizon may allow you to take more risk than your average peer.
- Am I invested appropriately between stocks and bonds? In the simplest sense, “risk” in the markets often refers to exposure to stocks rather than bonds. The time horizon factor can often sway allocation profiles, but even if there are two investors with the same time horizon ahead of them, their personal tolerance for equity market volatility can be different. Also, your unique circumstances can be used to fine tune your portfolio.
- Am I saving enough? This is often a question that is relevant to one’s retirement savings. For many, retirement feels far away, and it may be difficult to make sacrifices in the present for something that seems so distant. Many Americans fall below the general expert recommendation of contributing at least 10 to 15% of gross pay in order to reach a successful retirement. If you fall into this group, keep in mind that saving now allows the power of compounding to work on your behalf. Also, if your employer offers a matching program for your retirement account contribution, you may be missing out on a generous addition to your savings.
- Am I periodically rebalancing my account? If you have constructed your own asset allocation, you will need to rebalance regularly. Consider at least an annual rebalance to ensure your asset allocation remains aligned with your investment strategy.
- Have I considered using a Roth account? There’s a spike in the popularity of Roth vehicles for retirement savings among investors of all ages. Roth allows investors to save for retirement with their after-tax contributions and to withdraw during retirement, tax-free. This is a hedge against future increases in taxes and offers tax-diversification of one’s assets in totality. If a designated Roth 401(k) or 403(b) is not available through your employer-sponsored plan, you may open a Roth IRA through a provider of your choice.
- Is my beneficiary designation up to date? Remember to update your beneficiary(ies) whenever you have important life changes. A good rule of thumb is to review your beneficiaries annually.
As we start 2021, we’re on our way toward recovery from the events of 2020. The world will continue to hope for a distribution of the vaccine, a safe and full reopening of the global economy, and most importantly, a successful management of public health throughout the world.
To learn more about investment planning visit: https://wealthmanagement.cbiz.com/
Investment management services to individuals, corporations, trusts, endowments and foundations offered through CBIZ Investment Advisory Services, LLC, Registered Investment Adviser. For information about additional service offerings, please see the Form ADV 2A for CBIZ Investment Advisory Services, LLC at adviserinfo.sec.gov.