By Jeremy Wallace and Andrew Hart
When life is going smoothly, it’s easy to stick to your strategies and decisions. But throw in a global pandemic, economic worries, and social distancing and it’s not hard to start worrying and second-guessing yourself. We’re here today to help you battle fear and anxiety by giving 4 financial actions you can take during this time of crisis.
1. Check In With Your Advisor
Your financial advisor is educated about what’s going on and will be able to give you clarity on exactly what is happening to your portfolio. Your advisor has likely been through market turmoil before and can help you feel confident that your money is in the right place and you don’t have more risk than you are comfortable with. Most financial advisors are still operating, albeit virtually, so reach out and schedule an appointment before making any irreversible financial decisions.
2. Trust The Process
As Warren Buffett aptly said: “Be fearful when others are greedy and greedy when others are fearful.” So don’t change your whole investment strategy just because the market environment changed. When you first started investing and working with your advisor, you likely created a personalized strategy based on your needs, time horizon, goals, and risk tolerance. Trust that process.
At Wallace Hart, we have specific rules in place so that if the markets trend below a certain point, we move to cash. This allows us to respond to market conditions and make adjustments rather than just hold on no matter what, allowing us to protect our clients’ money from staggering losses. In other words, trust the process you’ve put in place and rely on us when you start to worry.
3. Lighten Your Tax Burden
Tax-loss harvesting is the strategy of selling a security that has experienced a loss. By realizing a loss, investors can offset taxes. The sold security is usually replaced by a similar one to maintain the desired asset allocation and expected returns. With the markets hitting low points, it might be an ideal time for you to sell something and take the loss, but then buy something to participate in the market’s recovery. If you look for the opportunity to invest in something similar or rebalance, you win and have a tax deduction to use for this year and potentially even future years.
Before doing this, talk with your advisor about how much of a difference this could make on your financial plan.
4. Look Into A Roth Conversion
Market downturns can be the perfect time to convert to a Roth IRA and pay significantly less in taxes, not to mention we may be at the lowest tax rates we will see in our lifetime. Let’s say you have an IRA that used to be worth $100,000 and is now worth $75,000. You could convert this position now and pay less in taxes than what you would have paid when it was worth $100,000…25% less.
There are many factors to consider when deciding if a Roth conversion is right for you, such as your current income versus your expected retirement income, your projected minimum required distributions, the tax implications, current liquidity, etc. Making this decision is something you should discuss with your advisor.
5. Look For Opportunities
A few other opportunities you could take advantage of with lower interest rates and stock prices are the following:
- Weigh the pros and cons of refinancing your home.
- Purchase future travel at a discount.
- Fund a 529 for your child’s college tuition with low market prices.
- Refinance any outstanding debt.
- Buy a home at a discount if you are currently renting.
Are You Ready To Take Control?
When this market volatility has passed (and it will), some will lose, some will break even, and some will get ahead. At Wallace Hart Capital Management, we want to see you get ahead, and we welcome the opportunity to help you make decisions that will enhance your finances so that when we go back to our regular routines, we do so with more clarity and confidence. To get started, contact us at 859.300.3030 or request an appointment online today!
About Jeremy
Jeremy Wallace is founder and chief investment officer at Wallace Hart Capital Management, an independent financial services firm committed to offering comprehensive advice and customized services. Jeremy has 20 years of experience in the financial industry and is passionate about helping clients preserve and enhance their wealth so they can pursue their passions. Jeremy graduated from Emory University with a degree in international economics and a certificate in financial planning. Outside of the office, Jeremy spends most of his free time with his wife, Julie, and their three children, Isabel, Lincoln, and Reid. He is an avid Chicago Cubs baseball fan, and he enjoys golfing with his wife and traveling with his family. Learn more about Jeremy by connecting with him on LinkedIn.
About Andrew
Andrew Hart is the co-founder and chief planning strategist at Wallace Hart Capital Management, an independent financial services firm committed to offering comprehensive advice and customized services. Andrew has 15 years of experience in the financial industry and strives to provide new and better strategies and processes to improve his clients’ lives. Andrew graduated from Wittenberg University with a bachelor’s degree in business management and holds a certificate in financial planning from Georgetown University and the CERTIFIED FINANCIAL PLANNER™ designation. When he’s not working, you can find him enjoying the city of Lexington, KY and spending time with his wife, Susan, twin sons, George and Ted, and daughter, Merritt. To learn more about Andrew, connect with him on LinkedIn.
4/28/2020