Effective business owners and executives know that the only predictable quality of today’s industries is constant unpredictability. As leaders of America’s largest industry hubs, business leaders in the Carolinas know this well.
With more than 40 million Americans currently unemployed, millions of others working from home, hours cut and economic instability, the daily lives of employees are anything but routine right now. This is also the case for business owners and high-level executives. Great fortune – or disaster – can hit your business at any time.
But a job loss or business downturn doesn’t have to result in a retirement financial horror story.
The biggest factor of success in these situations is planning beforehand, so your financial life is protected in virtually any situation. Small business owners and corporate executives face unique risks that are different than employees, which makes protective financial measures and comprehensive retirement planning all the more important.
Business Downturn and Job Loss
Layoffs and career pivots are an unfortunate component of the business world. The dynamic nature of the U.S. economy offers the potential for rapid economic growth – and rapid decline.
A straightforward remedy to an unexpected change in your work-life is to build an emergency fund to help keep you afloat. This savings should cover housing, insurance and your bills. These funds should not be invested to offer quick access without the need for trades or unwinding your portfolio.
If possible, it’s best to have enough savings to maintain your standard of living while you find a new position. High-level jobs with either “Vice President” or “Director” in the title take approximately 76 days to fill. This timeframe may be even longer in the event of a recession or market uncertainty, like we’re experiencing now. The amount of diligent savings you accumulate can make your transition into a new position smooth sailing or a rocky road.
Your Retirement Accounts
If you lost your job, talk with your financial advisor right away about your plans going forward. Many unemployed are turning to their retirement accounts to help make ends meet. But this isn’t always the best move. In fact, if you can, you will want to continue contributing to your plans and investing in your future. Not only can the current low stock market prices be a hidden opportunity, but early withdrawals can result in penalties and taxes.
It’s important to discuss your situation with a financial advisor to determine your options and what works best for you and your family. This step can be the difference between difficult times and retirement financial horror stories.
How to Withstand Stock Market Volatility
As the saying goes, the stock market “takes the stairs up, but the elevator down.” A steady period of healthy market gains can be quickly negated with a sharp decline. The panic caused by the Coronavirus alone has been rattling global markets since mid-February.
It goes without saying that likely all investors have experienced a dip in their portfolio value recently. But investors with diversified portfolios are more likely to experience a smaller decrease in value. Knowing this, and ensuring that your portfolio is diversified and matches your individual risk tolerance is paramount to weathering these market storms.
Address Your Own Risk Level
Risk tolerance is your capacity to endure potential market losses. It varies by investor and can change over time. There is no correct or incorrect level of risk tolerance. The most important factor is that you and your financial advisor are on the same page regarding your risk preferences.
A portfolio that fits your risk tolerance can still grow and generate the returns or income that you need. Your investments should always match your risk level, whether you consider yourself to be aggressive or conservative. Otherwise, you may prematurely sell your investments after a severe downturn, before the market potentially recovers.
Today’s market is comprised of tens of thousands of different investments, each with its own unique characteristics and responses to market events. Consequently, these investments do not move in tandem when the market fluctuates.
Nevertheless, investments that fall in the same category tend to move similarly based on market conditions. This means that a well-designed portfolio, with the right balance of different stocks, bonds, commodities, alternative investments and others, are in a strong position to withstand volatile market. This is the core of diversification.
Your Retirement Accounts Can Potentially Boost Your Portfolio
Investors love bull markets and work hard to spot approaching bear markets. Witnessing a 10 to 20 percent market rally is always nice, but it’s also important that you build your portfolio further by adding new dollars to it. Together, saving and investing becomes your one-two punch to a strong retirement portfolio.
Even if the market experiences a decline, its critical to continue contributing to your retirement account if you can. Each time you add money to your retirement plan, those dollars are typically directed into your investments. This can be mutual funds, ETFs, individual stocks and other vehicles.
If the market experiences a decline, you can potentially purchase these investments at discounted prices. If you contribute to your retirement account during a market decline, you can still potentially experience higher rates of return.
Business owners also have unique retirement account options that can further boost retirement savings.
Protect Your Success with Top Financial Advisors in the Carolinas
The success you gained in your business and working life isn’t always easy. While all investments require risk, there’s no need to needlessly expose yourself to risk by not having a proper financial plan in place. At Global View, we’re here to help.
Harness the expertise of top financial advisors in North and South Carolina, and be ready for any situation life throws at you. We don’t want anyone to experience the retirement financial horror stories we all fear. If you have questions about your financial future, contact us.