Stay on track for retirement. Ask yourself these key questions.
Today, we:
- Delve into essential mid-year review items for you to consider.
- Provide a comprehensive “Prolonging Retirement Income” checklist, i.e., key insights that help fund long retirements.
- Review stock market trends.
- Wrap up with an activity update regarding your investment portfolio.
Mid-Year Review
Generally, we recommend you review your personal circumstances every six months. Therefore, if any of the following has changed in your life, please contact us so we can get ahead of potential financial implications.
Employment: Have you or your partner changed jobs?
Family: Have your family dynamics changed, e.g., divorce, marriage, birth, death, aging parents, children with special needs or other? If so, it’s likely you’ll need to update your estate plans.
Health: Is anyone in your family experiencing a serious illness, or are you or your significant other almost 65 and, therefore, need to sign up for Medicare?
Large Expense, Sale or Inheritance: Let’s plan ahead for any significant financial change, like buying or selling a home, major vacation, new to college, selling a business, etc.
Pre Retirement: If you’re contemplating retiring in the near future, contact us as soon as possible. There are specific financial steps and decisions to take before leaving your employer. Also, we’ll want to do a deep dive regarding your Social Security benefits.
Detailed Prolonging Retirement Income Checklist
We recently published a detailed checklist called, Prolonging Retirement Income.
It’s a comprehensive look at personal items to review no less than annually, to help prolong your retirement income.
The stock market is up!
Sure, there are still daily ups and downs. However, overall the market is up.
What’s intriguing, is the rise came unexpectedly to many financial analysts who were primarily focused on negative news coverage related to inflation and the potential for a recession.
Regardless, the S&P 500 is up about 14% and the NASDAQ has surged by a substantial 30% since January 1, 2023.
What factors are contributing to the rise?
Two key trends are driving the market’s climb, including tech stocks bouncing back and strong consumer spending.
Tech stocks experienced a 30-40% decline last year, but have since shown a strong recovery, likely because the stocks swung too low. Also, tech companies have been reporting strong earnings growth in recent quarters.
In terms of consumer spending, there’s a ton of pent-up demand post Covid, e.g., families wanting to travel, dine out, etc.
Also, the supply chain shortages are mostly over, enabling consumers to backfill purchases they couldn’t facilitate during Covid.
It’s also refreshing to see some food prices finally drifting downward. For example, the price of eggs fell 14% last month.
Your Portfolio: What we’re doing right now.
In April, we started increasing bond durations, and continue doing so today, including moving some funds from short-duration bonds (1-to-3 years) to intermediate-duration bonds (3-10 years).
Related: Deep Dive Article
The following Capital Ideas™ article, “Bond outlook: Fed pause leaves many paths to income potential” discusses the outlook for bonds and the potential income opportunities they offer amid market uncertainties. It highlights that after a challenging 2022, fixed income is now providing stability and diversification from equities. The Federal Reserve’s recent decision to pause interest rate hikes has created an environment of higher income potential and new opportunities in the bond market.
Also in April, we mentioned there were quite a few international stocks on sale. After a great deal of research, we’re finding some good values.
During the past two years, we reduced your international equity exposure to be roughly 5%. However, recently we’ve increased this to about 7%.
Similarly, some financial advisory firms are currently exposing their clients to approximately 10% international exposure.
Why are we (slightly) more conservative?
There are two key reasons, including:
#1—U.S. Companies Outpaced International Performance
Fourteen out of the last 15 years, U.S. companies have outperformed international companies, primarily driven by U.S. tech companies.
#2—China and European (EU) Challenges
As a communist system, China possesses the authority to close down businesses at its discretion, which can introduce an element of uncertainty for investments.
In terms of the EU, it’s a social democracy which is expensive to operate. For example, they provide excellent healthcare, education, unemployment benefits and public pensions; however, this often results in less profits for businesses.
It’s important to note, many international businesses are doing well, including Toyota, Hitachi and Moët Hennessy Louis Vuitton, i.e., Louis Vuitton luxury fashions.
Remember, you’re already getting international exposure within your portfolios, since 30-40% of the S&P 500 earnings come from overseas.
Comments or Questions
Your comments and questions are always encouraged. Please reach out anytime.
–David Bunker, Financial Advisor & Fiduciary
Before You Go
Get help optimizing your retirement income. Download our FREE “Prolonging Retirement Income” checklist.
Also, receive help retiring to the life you want, schedule a complimentary financial planning consultation.