The stock markets have rebounded from their heavy losses in the early days of the pandemic. But there will undoubtedly be another dip sometime in the future, followed by another recovery, and so on.
The question for people at or nearing retirement age is, “When do I get out of the market?”
“Ultimately it comes down to the crystal ball question,” said David Donhoff with Leverage Planners Wealth Management. “It's much more a question of where we are in our own life and how much more time do we have to wait for when the markets do make their inevitable correction or crash.
“Because what they say what goes up must come down, but also what goes down eventually comes back up. The question is can we wait long enough? So it all comes down to how old we are, how much waiting period we have to recover from the inevitable.”
Playing the stock market can lead to great riches, or destitution. It’s all a matter of when you need to cash out. Shifting your investments away from this type of risk into safer, principal-protected accounts is something Donhoff advocates for.
“Everybody loves to talk about the hot tips and hot stocks and bitcoin and the whole nine yards,” he said. “Here's the critical thing to understand: What's important is that you make sure you have your foundation in place, that you have zero risk of loss.”
People often think that wealth planning and management is for someone else who they thinks they are much better off. But the truth is, there are many so-called “blue jean millionaires” out there.
“They're the boring, frugal, high work ethic, neighbor next door – basically people who’ve knuckled down and work hard and don't spend as much as they make,” Donhoff said. “A lot of people think, ‘Well someday I might be a millionaire.’ Many people have accumulated four or five, six hundred thousand dollars of total retirement money, plus the accumulated income that's coming in the future. They don't realize, but they've already crossed that line.”
Another area people tend to think is for someone else is long-term medical care. The State of Washington just enacted a payroll tax to provide everyone with basic long-term insurance. But as Donhoff recently explained, there’s lots of incentive to opt-out by acquiring private insurance.