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There are also people who understand that Bidenās continued unnecessary spending IS exacerbating inflation, and his choking off oil production has also caused prices to rise.There are people out there that understand that the inflation we are going through and the likely recession is not Biden's fault. Presidents, democrats or republicans get too much credit when the economy does well and too much blame when it slumps. The boom-and-bust cycles that are inherent in capitalist economies depend on forces that are independent of any presidentās actions. Itās mostly luck that determines how the economy is doing when itās time to elect a president.
The last option for recent retirees should be to sell equities or fixed income securities. The market averages are down about 20% and more risky equites are down 30% to 90%. The average bear market does not drop more than 35%, so you're probably over half way to the bottom. That is no time to start selling. The average bear market does not last more than 10 months. So there is a very good chance that we will be in a bull market by the end of next year. Lastly it makes no difference which party is in power in a recession. Both parties will provide financial stimulus in form of tax relief and/or increased immediate government spending. This stimulus is likely to shorten the recession. However, politics is the least of your worries.What would you suggest to current retirees who had the recommended mix of asset types, but still has seen a frightening decline in their IRAs (which would be the bulk of the middle class)?
Sell at this point to protect against further declines, or ride it out and live off the cash one has put aside for another year or so hoping the market will be higher in 12 months? Or, to protect cash and not be forced to sell stocks that have been decimated, take a reverse mortgage for those of us who have little to no mortgage?
Also, do you think the market will crash even more if the Dems retain both chambers after the election, since there will be no way to stop Bidenās free spending, or has the damage been done and we are set for hard times even if the Republicans win?
Most government major projects such as infrastructure sending takes time to implement and it usually is spread over many years so it has little effect on current inflation. Covid-19 relief checks which spurred spending started under Trump and continued under Biden. This spending plus shortages was the major cause of the inflation. This has stopped. Biden is not asking for any funding to continuing the payouts.There are also people who understand that Bidenās continued unnecessary spending IS exacerbating inflation, and his choking off oil production has also caused prices to rise.
We also need to get deadbeats back to work and stop the āI canāt work because of COVIDā programs. My liberal county has extended the COVID rent relief program, and I know several able-bodied adults taking advantage of it and not working. By putting them back to work, we could improve the supply side of things.
I disagree with your politics, but I very much appreciate your financial insights. I hope youāre right that this decline will be short-lived, and that within a year or two we will be in a bull market.The last option for recent retirees should be to sell equities or fixed income securities. The market averages are down about 20% and more risky equites are down 30% to 90%. The average bear market does not drop more than 35%, so you're probably over half way to the bottom. That is no time to start selling. The average bear market does not last more than 10 months. So there is a very good chance that we will be in a bull market by the end of next year. Lastly it makes no difference which party is in power in a recession. Both parties will provide financial stimulus in form of tax relief and/or increased immediate government spending. This stimulus is likely to shorten the recession. However, politics is the least of your worries.
As to what you should do depends on a lot of factors. If you have worked out the percentage of year withdrawal, they might want cut on withdrawal. Say if was 4%, drop it to 3%. The general advice from financial consultants are to cut spending back as much as possible. Consider short term employment if possible. If you have no need to leave an estate to children, then a reverse mortgage might make sense. If you must sell assets, maintain your asset mix percentages. It is very temping to sell what has gone down the lease which are usually fixed income, however this opens your portfolio up to unwanted risks. The opposite is true for selling what has gone down the most. That will open your portfolio to an overbalance in fixed income which will hurt future growth. So plan to keep your asset allocation about same if you sell.
I was doing a little checking and our last recession occurred in 2020 and lasted 2 mos. prior to that was the great recession which lasted 18 mos. During that period the stock market lost half it's value. It took a little over 3 years to recover fully and it gave way to one our longest bull markets in which the market increase by over 400% from it's 2008 low. There is really no way to predict the market but one thing has held true for over 200 years. Every bear has given way to a bull market.I disagree with your politics, but I very much appreciate your financial insights. I hope youāre right that this decline will be short-lived, and that within a year or two we will be in a bull market.
Short-term employment is not possible for many senior citizens, myself included, and usually due to limitations that come with older age. Right now, I have enough cash to spend down for a while, and if the market is still down when I no longer do, Iāll consider a reverse mortgage.
Thank you again for your insights.
