Financial Planning in a Crisis: At Home

Echoes at Home…

It’s been another couple of weeks “at home” willing to do our part complying with the shelter-in-place order.  Then, on Tuesday we heard the decision to close all public schools for the remainder of the academic year.  Let me count… that’s another six weeks at home for the kids and an end to my son’s first year of school baseball before it ever really got started.  You likely have a very similar story.

To follow up my last post, with this extra time I’ve already been able to “learn things.”  Here are a few of them: I don’t read as much as I should, my prayer list is way too short, and we have become much too dependent on technology.  Therefore, it was a nice surprise yesterday when my daughter received – get ready for this – a hand-written note from a friend across town.  She immediately wrote her back.  Sure, there’s technology they use to get online and see each other in a much faster and “easier” way.  But it was fun to see them communicate the way we used to when I was a child – one that, dare I say, took a little more effort.

We’ve also seen other changes.  It’s been nice talking with neighbors we seldom, if at all, talked to before this pandemic.  I’ve seen the opportunity cost associated with failing to read more.  But I’m not blind to the fact that these things take time – as does prayer, or anything else worthwhile.  Given these extra-long days at home let me encourage you to “take inventory” and, perhaps, even reshuffle priorities.

In doing this myself I also came across some good advice that I wanted to share.  Each quote was like an echo from the past that helped take away any lingering emotions.  If we are honest, staying objective can be a difficult task, especially when making investment decisions.  So, while you are also “at home” maybe these timely quotes from Sir John Templeton will help you:

Sir John Templeton

  • If you begin with a prayer, you can think more clearly and make fewer mistakes.
  • An investor who has all the answers doesn’t even understand all the questions.
  • Don’t panic. The time to sell is before the crash, not after.
  • The only way to avoid mistakes is not to invest—which is the biggest mistake of all.
  • The investor who says, “This time is different,” when in fact it’s virtually a repeat of an earlier situation, has uttered among the four most costly words in the annals of investing.
  • If you do not know what you want to achieve with your life, you may not achieve much.
  • The best investment with the least risk and the greatest dividend is giving.


Client Update 4-3-20

Just an Update – Friday, April 3rd

Last week we saw two significant events happen in the market.  First, on Monday, March 23rd, the market put in a possible bottom at 2,237 (S&P 500).  Second, just 3 days after that, on Wednesday, March 26th,  we saw the market back at 2,630 (a rebound of 17%).  In the short-term don’t be surprised to see the markets go back down and re-test the lows from March 23rd.  Considering that there is more negative news on the virus to come out (more infections, more deaths, more unemployed, more companies’ quarterly earnings affected, and just the negatives of people having to shelter-in-place) the markets may not be finished with their decline.  Yes, we remain positive about markets recovering over time, but in the short-term we may still see ‘red’.

On another note, here a piece of good news.  As a part of the CARES Act signed into law on March 27th, RMDs (required minimal distributions) have been waived for traditional IRAs, SEP-IRAs, SIMPLE-IRAs, 401(k), 403(b), and 457(b) plans.  Additionally, RMDs have also been waived on non-spousal inherited IRAs for both Roth and Traditional IRAs.  For someone who has already started their RMDs (but not completed them) it is possible to simply discontinue the remaining amount through the remainder of 2020.

Additionally, here is another forgiveness that some will appreciate: for anyone who turned 70½ last year and were planning to delay their 1st RMD until April 1, 2020, that RMD is also waived.  We would suggest anyone who can reduce or stop their withdrawals this year should strongly consider this.  The benefits could be reducing income taxes as well leaving this money invested to hopefully regain some lost ground.  If you would like to reduce or stop your RMD please let us know sooner rather than later.

Also, keep in mind another piece of good news: unless you are taking withdrawals (or selling) during this time, you have not lost any shares.  That means that while your values are down, your shares are not.  So, when prices eventually do recover, you can regain your value (and possibly more if you add or reinvest during this period).

Very soon, if not already, investors all across the country will receive their March statements (including their employer 401k statements) and many will be very surprised how much their account ‘values’ have declined.  Even though they have heard how much the markets have corrected they have not calculated this affect into dollars.  Our suggestion is to not overreact and try to remain positive, not focusing too much on these quarterly/periodic statements.   Over time, as things get better, we will help you regain ground and continue your path to reaching your long-term goals.

From each of us thank you for the opportunity to serve you and walk this journey with you.  Many of you have said encouraging words and voiced prayers for us.  Please know we appreciate you and are committed to helping you through these days and look forward to the better days ahead.

Preparing for your Golden Bell

The 3-time major champion Brooks Koepka approached the 12th hole (nicknamed “The Golden Bell”) at Augusta National within 2 strokes of the lead during the 2019 Masters.  He quickly grabbed a 9 iron, aimed right at the flag like he always did, and proceeded to hit his ball into Rae’s Creek carding a double bogey.  Brooks said he did not react to his ball going into the water because he didn’t want Tiger Woods to know that the wind affected his ball.  He missed the point of who he was playing against. 

Koepka was playing against the 15-time major champion and Tiger was mentally prepared.  Tiger always knew that he was not going to take on the flag at 12.  The shot was a safe cut shot off left side of the bunker.  Miss it straight… you are fine.  Miss it left…you are safe.  Miss it right… you are on the flag.  Most importantly Rae’s Creek is de-risked and double bogey is most likely taken out of the picture by aiming to the left of the bunker.  Tiger carded a par at 12 and went on to win the 2019 Masters by one stroke over Koepka cementing his 15th major championship.

Countless ‘experts’ said Tiger would never win a major again.  His stock looked bad.  His back was a barrier.  Negative ‘noise’ from the public persisted for years.  But he did win a major again. 

Some may say that the markets will never recover, but history and smart money tells us differently.  Per MFS’s By the Numbers on March 16, 2020, “In all 11 bear markets that suffered at least a 20% decline in the S&P 500 Index in the last 75 years (1945-2020) before last week’s 12th bear market, the stock market eventually recovered 100% of the loss sustained, i.e., going above the previous bull market high.  The average time the stock market took to recover back to a new high closing price from the low point in the downturn was 24 months (source: BTN Research).

We can learn from the sports analogy above.  What can you do now to prepare for your 12th Hole at Augusta National from a ‘financial planning’ perspective?

  • Note the recently announced extension date for your 2020 federal individual taxes: July 15th.  State tax return due dates may be different than federal.  Note that the extended date for Mississippi is May 15th.  Use your appropriate tax deadline to add IRA contributions for the 2019 tax year, or to open a new IRA. 
  • If the recent market volatility does not scare you, consider adding to your investments in order to capitalize on good stock valuations.  Or, you could consider reallocating some fixed income investments into some undervalued equities.  Make sure your dividends are reinvesting in equities.  Remember that the uber successful investor Warren Buffet once invested in distressed banks in 2008 when the negative experts said not to.  He made a lot of money off those investments.  Uncertain times create real opportunities due to discounted valuations.
  • If the recent market volatility does scare you, consider paying dividends into cash and prepare to reduce your asset allocation from equities to a more appropriate risk level once the market recovers some lost value. 
  • Review your named beneficiaries on investment accounts, retirement accounts, and insurance policies.  In addition, make sure your insurance policies are sufficient for your current needs. This planning sounds simple but it is important.

The great Jack Nicklaus once called “The Golden Bell” the toughest tournament hole in golf.  In these uncertain times, it is easy to lock-up and avoid preparing for your “Golden Bell” until you are up on the tee box.  We are here to help you prepare your financial future now to be better positioned when the winds and tide turn again.  They will.  Be prepared like Tiger Woods was at the 2019 Masters.

Thank You for Checking In

With all the day to day uncertainty of life now, we are forced to think about the things that we may have inadvertently taken for granted. Each of us typically get into a daily rut: get the kids off to school, work our jobs, come home and feed the family, then turn around and do it all again. Now with little notice, life is nothing like it was a week ago. Families are juggling how to work, if they are even able to, and also maintain their households while the schools have closed. As parents, we are learning to homeschool, and perhaps gaining a much greater understanding of the role teachers provide to each and every one of us.

Over the last week or so I’ve been so blessed to hear from many clients simply calling to check on us to make sure we are doing okay. In this business, each and every one of us only want the best for our clients. We tend to carry some of the burden of how the market is reacting on our shoulders. Having been in the business myself for over 28 years, I have met some the of greatest clients who I now consider my friends. So, it’s good to see as we are looking out for them, in turn they are worried and thinking about how we are holding up. This brings such a comfort to our office and keeps us wanting to work harder for each and every client.

Please remember during these times of uncertainly that we are on ‘your team’ and are available to help you any way we can. If you need us please don’t hesitate to reach out. Thanks again for opportunity to serve you all. We will all get through this together.

Financial Planning in a Crisis: Learn

Learn Things…

I admit it, during this self-quarantine lockdown called the Coronavirus Crisis (or pandemic) I’ve become a NCIS: New Orleans junkie.  Very quickly after binge-watching a few seasons, my favorite quote is one by Dwayne Cassius “King” Pride in just about every episode: “Let’s learn things.” A great way to motivate his team of agents working on a new case.


Thing is, the case we are currently faced with – the coronavirus – isn’t a new one.  Sure, the cause is new (the virus) and presents a challenge in and of itself.  But the idea of a ‘crisis’ isn’t new.  We have seen crisis after crisis hit Wall Street.  And time after time, investors tell us the some of the same things:

“What do I do?”
“Should I sell everything and protect what I have left?”
“It just feels different this time…”
“I’m going to lose everything!”

I could go on and on with similar quotes or headlines.  But let me challenge you to think a little differently about this.  It’s like we are sitting in MTAC or the squadroom and Agent Pride is telling us to, “Go! Learn things!”.

Falling stock markets have a way of teaching us a lot about our risk tolerance, our patience, and our goals.  So, what have you learned about yourself over the last two weeks?  Maybe it’s that you aren’t as risk averse as you once thought.  Maybe it’s that you’re more of an opportunist than you once thought, and are ready to invest to take advantage of lower prices.  Whichever the case, what needs to be different this crisis is what you choose to learn about yourself.

So, stop and reassess your reasons for investing.  Then write it down!  Remember, “The faintest ink is more powerful than the strongest memory.”  As you go through this process, one of two things are likely to happen: 1) you may just learn something new about yourself, or 2) you confirm what you already knew about yourself.  Either way, take this information and use it to reinforce your personal investment plan.

Financial Planning in a Crisis: Recovery

Picturing a Market Recovery

You may be asking yourself, “When will the market recover?” or “What will a recovery look like and will it be worth the wait?”  These questions seem appropriate.  Without all the answers, let us give you an illustration: the line isn’t straight up, but rather a zig-zag pattern.  Let us remind you that each correction takes different amounts of time to come back, but if given enough time, they do eventually come back.  We can discuss the problems all day long, but unfortunately no one can tell you exactly when it will be.  Looking out, hopefully a year from now we will all ‘look back’ and see that we had another good buying opportunity in 2020 (in other words… increased share prices).  Consider the chart below which illustrates what happened after the Global Financial Crisis in 2008:


To illustrate a sample market recovery, visualize that you are at the bottom of a long staircase that leads to the Capitol Building (maybe 40 or 50 steps) and you need to climb to the top to enter.  As you walk up several steps you run into several others who are blocking your way.  In market-terms, these represent investors who were unable to sell, maybe trapped due to low prices, but now see current prices as acceptable.  As they step off (sell out of the market) you may be forced to ‘step down’ so that they can get by before you are able to pass them.  Get the picture?

As you continue upwards, maybe another several steps, a strong wind comes and causes you to drop a step or two (negative news releases about the economy, or perhaps a company’s revised earnings, etc.)  As the ‘wind’ settles down you regain your balance and proceed.  After a few more steps you are higher and all of a sudden you feel like jogging the next few steps (maybe this is a positive news report, such as a vaccine for coronavirus or a drug to help offset the symptoms).   Again, get the picture?

As you continue, at some point you may stop to catch your breath, and you ‘feel’ like you haven’t made any progress because the front door is still well out of reach.  Then, after a few more steps it starts to rain and you ‘hunker down’ for a few minutes to weather the storm (for instance, the market has stalled and doesn’t grow for a few weeks).  Eventually, however, you know that the sun will reappear, and the rain will eventually dry up (the market starts receiving positive news about the economy and corporate earnings are more predictable).  We could go on and on… as you take few steps up, you also from time to time are forced to take few steps back.

To finish the story, a loud warning speaker announces a tornado warning and you run back down to where there is a small storm shelter (maybe it’s an announcement of a recession that causes you go about half way back down again) and as you enter, you see that a few people are scared the shelter won’t protect them.  Others say that it will take too long and they flee all the way back to the start (and sadly some get blown away).  The next morning is a new day and you start walking upward again.  Eventually you do, despite all the detours along the path, reach the front door and enter the Capitol Building.  Sure, it took longer than you anticipated, but you made it!  As you walk in, you comment, “This is even better than I thought!”  Some friends you know are already there and you enjoy the visit.

We are all on a journey.  The above illustration may seem silly, but it’s representative of the zigs and zags of investing (and of many ‘other’ things in life).  Don’t let the journey, the detours, the ‘weather’, all the noise, etc. discourage you from continuing onward.  Eventually, with persistence (and proper planning) you will reach that goal.

Financial Planning in a Crisis: Cash

Think you need CASH?

During market corrections advisors get calls from clients requesting cash.  This is particularly when the market is having a bad day.  Sometimes it’s for a vacation, or making a large unplanned purchase, or simply deciding to pay off credit cards.  And then sometimes investors will unnecessarily turn “sour” on a long-term investment (during down markets) in order to fund a dream running through their mind.  Do you get the picture?

To preserve one’s portfolio and enhance chances of a solid recovery, we suggest that people not redeem from their investments unless it is absolutely necessary.  An investor’s portfolio should be their ‘serious’ money for long-term goals (retirement, new business, etc.)  If this is your situation, ask yourself “Can I delay this decision?” or “Can I put off this purchase or simply not spend this money?”  Also think through if you are making money by doing this, or possibly costing yourself something that you may not get back?   Many times, unnecessary purchases are difficult to recover from.

During times when you need cash, investors should first go to their checking or savings accounts.  ‘Emergency funds’ should have been established and funded for unexpected needs.  If you have not planned ahead then use this uncomfortable time to revise your plan (maybe through professional financial advice) so you may better handle needs going forward.  Don’t make a bad decision today that you will pay for years down the road.

2020 Market Correction

Several have asked about our thoughts on this market correction. First, we are sad about the lives that have been affected by this virus. Since December 2019, the coronavirus (Covid-19) outbreak has devastated many lives in many different countries. As it relates to the investment community, we have also felt the short-term impact of this virus. However, we believe the markets should recover with hopefully very little effect to our economy. As with other corrections we have seen, don’t be surprised if we potentially see the markets go lower and continue their wild “volatile swings” until things “clean up” and we eventually get back to where we were. Also, don’t be surprised to hear the media report some really “crazy” scenarios that may occur. For the most part we think this could end up being a good buying opportunity for the long-term investor. Many times these types of corrections can propel the market to go higher (dragging in new money at good entry points) once it recovers. So in the meantime, consider other possible benefits, such as declining mortgage rates that can provide excellent refinance opportunities for homeowners. As always, we encourage clients to call and discuss their concerns before making any knee-jerk decisions today that could result in derailing a good investment plan down-the-road.

Turn off the TV?

In a recent article by Bryce Sanders in a commentary written for ThinkAdvisor magazine, we were reminded that “Television programming is funded by advertising.  Advertisers want viewership.  One of the best ways TV news programs can keep people watching is to make everything a crisis.”  While news is important, it’s still necessary to step back and put things into perspective.  For example, with the Dow Jones Industrial Average trading around 25,000 it’s important to realize a decline of -799.36 (as we saw on Tuesday, Dec 4) is a -3% drop.  Did you know that for all of 2018 we have seen four daily declines of greater than -3% and this was the smallest of them?  These were on Feb. 5th, Feb. 8th, Oct. 10th and then again on Tuesday, Dec. 4th.  To the contrary, we have seen five days with returns greater than +2% and 26 days with a positive return greater than +1%.  The market will fluctuate.  But remember from each of the previous declines we eventually recovered.  The amount of time varies.  Sometimes it was within a week and as we saw in 2008 it took a handful of years.  The important thing to put into perspective is not every decline is a “crisis” and investors who stuck to their plan and didn’t panic eventually recovered, often going on to new investment highs.  Talk to your financial advisor to help put today’s volatile markets into perspective.

Dying with “Unrealized” Losses

From time to time investors accumulate “unrealized losses” in an investment.  These are losses that an investor could incur if they sold the investment.  And by doing so, they may be able to claim the loss on their tax return up to annual limits allowed by the IRS.

This is the big issue most people hear little about.  If the investor dies before realizing the loss, those losses will go away and cannot be claimed on the tax return.  The losses therefore could be lost forever.

Let’s look at why this may be important.  For an example, let’s say Mr. Jones is 85 years old and some time ago he bought an investment from his broker that today is valued at $20,000 less than his original investment, or cost basis.  If he sold the investment today he could realize the loss of $20,000.  Mr. Jones can use that loss by offsetting future taxable investment gains, plus up to an additional $3,000 per year of loss deductions.

While a somewhat complicated subject to discuss, be sure to talk this over with your investment advisor and/or tax professional.  If it makes sense to continue to hold the investment, your investment advisor should be able to explain how you can repurchase the investment after 31 days to avoid “wash sale rules”.  Don’t leave deductible losses on the table if your situation warrants taking advantage of some otherwise commonly overlooked tax benefits.