Planning Prepares Us for Economic Uncertainty

The phrase "economic uncertainty" seems to describe our current situation amid the war in Iran, rising gas prices, and a shaky jobs market. If you turned on the news today after a long hiatus, you may think it is time to liquidate your portfolio and run for the hills, after all, things seem very doom-and-gloom. But for those of us who regularly follow markets, economic uncertainty has been a constant force over the past few years since COVID, and making a rash decision would have come with significant trade-offs.

Since the pandemic officially ended in May of 2023, the total US stock market, as measured by the Vanguard Total Stock Market ETF (ticker symbol VTI), has risen by 20.3% annually when measured through the end of February of this year. Put another way, an individual with a $100,000 portfolio in May of 2023 would have seen their retirement savings climb to $170,000 during this period. However, if they had stayed on the sidelines, they would have missed out on $70,000 in gains!

While it is possible markets could have tanked during this period, and our example could have seen losses, no one can truly predict when an economic cycle will boom and bust; the number of factors, influences, and unforeseen events is too large.

So, as some of the greatest stalwarts, such as Warren Buffett, have preached, the best strategy remains buy and hold.

We will experience periods of economic turmoil, just as we will experience periods of jubilation. During these times, it is important to remain steady and not get scared or greedy, and instead stick to your financial plan. 

For some, this means regularly contributing to their retirement savings, while for others, it means drawing income based on what their portfolio can sustain. Importantly, sticking to one's plan also means adjusting one's risk tolerance as one approaches retirement, without becoming so conservative that one cannot sustain one's needs.

Financial planning is a balancing act that requires weighing our various wants, needs, and desires against what our financial situation can support. But understanding what your situation dictates requires careful review and adequate planning, something far too many people leave to luck.

Whether you prepare a plan on your own or work with a trusted financial adviser, taking the time to chart your finances is essential as you approach and enjoy retirement, with annual check-ins ensuring you stay on track.

At Lundeen Abrams Advisors, we meet with our clients annually and more frequently when needed to ensure they have not drifted from their financial plan, and we discuss various options to manage risks and offset rising costs. 

If you have yet to craft a financial strategy or you have not reviewed yours in some time, we encourage you to set up a time to ensure you are still on track to meet or maintain your financial goals today. Using this link, please set up a time on our schedule, and we will look forward to working with you to navigate economic uncertainty together as we work toward the life you have always wanted.