To impeach or not to impeach…that is the newest political hubbub going on in our nation’s capital today.
On top of this current uproar, we have also seen hearings, investigations, probes, sanctions, hints of military conflicts, inaccurate reporting, exaggerations, tariffs, etc.…
Markets Have Feelings Too!
What does each of these incidents have in common, other than spilling out of Washington D.C.?
Each time a new scare is thrown about, it has the potential to pitch our markets into varying levels of alarm. Newsmakers have thunderous, market altering voices and can drive either positive or negative momentum based on the tenor and volume of their influential opinions.
A thought – To our national leaders and the press that covers all things D.C.: for the love of the market’s ulcerous stomach, please just…Shhhhh!!! Or at least turn down the volume a little. Not everything is an 11.
Politics and Your Retirement
I trade in personal retirement. Specifically, I specialize in assisting federal employees in developing plans that pursue financial futures to survive and even thrive throughout retirement.
I don’t aspire to traffic in politics, parties, or partisan preferences. In fact, I was taught from a young age that one should never talk about religion or politics in polite conversation. Unfortunately, however, my domain and that of politics seem tightly bonded together for the conceivable future.
Therein lies the rub. With politics and markets so closely aligned, a comprehensive retirement plan has to take into account normal market activities as well as politically driven, unforeseen market performance. Anyone got a crystal ball?
I see it nearly every day: frustration, fear, and even anger are evident in federal employees considering retirement. Some stay at their posts longer than desired because they find themselves in the grips of the “what if yips.”
However, many of them are now finding some yip silencing solutions by focusing on factors they may be able to retain control over.
Example: Hope Canardly (Not her real name)
Hope is a FERS federal employee. She is in her early sixties, has over 30 years of federal service, is single, and wants to retire as soon as possible, but her fear and frustrations have been holding her back from actually planning for retirement in the near future.
Hope’s most significant concern was her fear that her TSP would not provide the safety net she would ultimately need. Hope found herself paying more attention than ever to her TSP account balance and factors that could potentially influence that balance. She quickly recognized balances were being swayed by uncontrolled phenomena such as the ongoing political drama coming out of Washington.
Fortunately, Hope has found some…well…hope. She uncovered her new-found optimism with some research and information gleaned from an advisor focused on federal retirement. (Yes, they may be hard to find but, they do exist).
Hope is now feeling somewhat fortuitous that she has obtained a measure of peace about her future retirement. How? In simple terms, she discovered a process that enhanced her level of financial self-awareness by being able to learn and recognize how she “truly” views her money.
By understanding her financial “feelings,” Hope can now identify her financial “risk tolerance.”
Sorry, a little necessary jargon – Risk tolerance is a way of measuring a person’s distinct boundaries to emotionally deal with threats to her wealth.
Hope’s advisor shared that she might benefit by taking an investment approach focused more on her risk tolerance rather than trying to time the market. With this method, she can strive to stay within her unique investment “comfort zone.” She realized that she may be able to avoid extreme dread in down markets and be satisfied with her growth rate during a bull market. Following this strategy could allow her to pursue a desired growth rate without wallowing in the routine panic associated with aggressive investing.
Now that she is feeling less stressed about retirement, Hope is finally making preparations to retire at the end of 2020.
Food for Thought
When finding a happy medium between the anxiety of assets bleeding away and the angst of missing an opportunity, as human beings, we are twice as driven by the fear of losing as we are to the pleasure of gains. (Psychology Today: What is Loss Aversion, March 8th, 2018)
Example: Even during times like recent growth periods when the markets are setting records, many feds are moving money out of the growth focused index funds in their TSP. They are opting instead to take refuge in the more conservative G Fund in anticipation of protecting their assets.
According to FedSmith.com author Ralph Smith’s November 1st, 2019 article, Which TSP Fund Went Up 23% in 2019?, more than $1.9 billion was recently transferred into the G Fund while many of the more growth-oriented funds were actually seeing significant withdrawals.
This would imply “timing” efforts by those anxious that hitting all-time highs will result in a sudden market decline.
Consider this: market timing may be riskier than riding out an intelligent risk (comfort zone) based approach. Remember, when it comes to retirement savings, there is, of course, the risk of losing, but there is also a risk of losing out on potential gains. Each possibility may have adverse effects on retirement savings.
So much animosity and noise out of DC has a terrifying impact on retirement accounts. This causes many federal employees to be concerned and confused about their personal retirement income prospects.
Not knowing what you don’t know is a terrifying state in which to exist, particularly when the uncertain topic is your financial health during perhaps the most financially vulnerable point in life, and yet that is often the condition in which many feds nearing federal employment withdrawal find themselves. Still, a little knowledge may help.
Threats to federal employees’ retirement can come from numerous places, including our own federal clamor. Therefore, when preparing, it may be advantageous to find a sensible approach that seeks a balance somewhere between oblivious procrastination and bloodcurdling panic that will allow feds to emotionally weather all the wind coming out of Washington.
“Infinity Financial Services is a Registered Investment Advisor and a member of both the Financial Industry Regulatory Authority (FINRA®) and the Securities Investor Protection Corporation (SIPC).”
Any opinions expressed in the article are those of the author alone. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Investing involves risks, including the loss of principal. No strategy assures success or protects against loss. Silverlight Financial, Infinity Financial Services and its affiliates do not provide tax, legal or accounting advice. This material is not intended to provide, and should not be relied on for tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction. For a list of states in which I am registered to do business, please visit www.silverlightfinancial.com