RETIREMENT? WHAT’S NEXT?
The month of August marked an important milestone for the long-running bull market.
On August 22, the bull market, as measured by the S&P 500 Index, extended its run to 3,453 calendar days (CNBC, various sources), becoming the lengthiest bull market in history, or at
least since WWII.
While we may celebrate the milestone, let’s take a moment to review where we’ve come from.
Before I go on, I believe a couple of definitions are in order.
First, a bull market is generally measured from the lowest point in a cycle to its peak. The peak can only be defined in hindsight, when the market has declined by at least 20% from its prior
peak. That decline is widely considered to be a bear market–the second definition.
That said, the S&P 500 Index bottomed on March 9, 2009 at 676.53 (data provided by St. Louis Federal Reserve).
There’s no way to sugar coat it. Late 2008 and 2009 was a bleak time for investors. Brought on by a financial crisis, the economy was sliding into a deep recession.
Companies were quick to jettison employees, and corporate profits fell sharply. But, as we’ve seen time and time again, stocks found a bottom, a new bull market emerged, and the
economy turned around.
Few could have predicted the current cycle would run as long as it has. Or, for that matter, run up as high as it has.
While not the best performing, the current run has advanced 329%, as Table 1 shows below.
What makes a bull market–a look behind the curtain
The themes that are driving shares today have been in place to varying degrees since the economy bottomed in 2009–economic growth, profit growth and low interest rates.
For much of the expansion, economic growth hasn’t been stellar, but it has lifted corporate profits, which are at record levels today (Thomson Reuters).
But let’s not completely discount the role of the Federal Reserve. In order to jumpstart the economy during the debilitating recession, the Fed pushed interest rates to rock-bottom levels
and it has been slow to raise rates.
Why does this lend support to stocks? Low interest rates encourage investors to look to other assets for income and capital appreciation. Put another way, low rates offer less competition
Throw in low inflation and the continued stream of stock buybacks from corporations (S&P Dow Jones Indexes), and powerful forces have come together to lift shares.
There has been no shortage of headwinds that have temporarily interrupted the bull market or, at a minimum, created concerns over the last nine years.
Financial turmoil in Europe, the U.K.’s Brexit vote, the collapse in oil prices, worries about China’s economy, and the downgrade of U.S. debt in 2011 were just some of the headwinds
that surfaced to create short-term volatility.
When headwinds have failed to throw the U.S. economy into a recession, the focus has shifted back to the positive economic fundamentals, and the bulls prevailed. Looking longer term, the bulls have always triumphed–eventually. Those who have bet on a long-term slide in stocks have been sorely disappointed.
If we open our history books, the Dow Jones Industrial Average was below 100 in 1915. Today, it’s above 26,000. Even if adjusted for inflation, the Dow is up over tenfold (Macrotrends).
In the end, the bulls win. Why? Short downturns in the economy–recessions–are followed by economic expansions that run much longer than recessions. Over time, the economy’s value
rises. It’s been that way for over 200 years.
We recommend very diversified stock portfolios; ones that include the major sectors of the economy. Investing in a diversified portfolio is much like buying a stake in the U.S. economy.
The economy may or may not be larger next year, but history tells us it will be larger 10 or 20 years from today. Continuing along that same road, the major market averages are likely to
follow a similar trajectory over a long period.
That doesn’t mean we won’t see a sharp sell-off from time to time. It doesn’t mean that stocks will necessarily match the economy’s performance over a short period. But it does mean there
is a long-term upward bias for stocks.
If you have a question or would like to talk about your investments, that’s what we’re here for. We are simply a phone call or email away.
The longevity of today’s bull market has rewarded patient and disciplined investors. We talk about the investment plan at length because it is the roadmap to your financial goals. We stress
this fact often. But it also helps pull the emotional component out of the equation. You know, the one that tempts us to sell when the market pulls back. Or, for that matter, may
encourage us to get too aggressive when stocks surge higher. The plan enforces a disciplined approach.
Disciplined investors succeed when the plan is built on a solid foundation.
I’m reminded of the story of the Three Little Pigs. One may take a disciplined approach. But, if that disciplined approach is a meticulously built house of straw, the inevitable winds will wreak havoc.
A disciplined approach, coupled with an income plan built on solid, historically proven principles, has historically been the best path to meet one’s goals.
School’s out forever–living in retirement
Do you know where you want to live when you retire? Some folks have mulled it over casually, while others have thoroughly researched it.
Will you stay in your current home? Will you reduce clutter and downsize? Familiarity lends a sense of security, but downsizing may reduce your living expenses.
Would you like to stay in the same town? Or, have you thought about retiring in a new part of the country, or outside the U.S? If so, what is important to you? What is it about that location
that attracts you?
Is it more hospitable weather, the cost of living, family? Do beaches, the mountains, or golf courses beckon? Are you longing for a sense of community?
Lists abound of the best places to retire. Many have value and take the general needs of retirees in mind. However, what’s important to you must take precedence.
You may have the ideal place in mind. Or, you may still be considering your options. There is plenty to dig through on the Internet. Consider the Retirement Living Information Center
(https://www.retirementliving.com/senior-housing) as one site that may be of assistance.
Do you want to live near your children and grandchildren? Technology allows us to be in regular contact with our loved ones. But is Skype or Facetime enough?
A close friend’s mother recently moved from Nebraska to be near her daughter and grandkids. She rents an apartment in an active adult community located in a suburb of a large city. With
the help of her daughter and son-in-law, she regularly attends the grandkid’s events, including basketball, soccer, and school plays.
She’s there for the major holidays. She is an important part of her family’s life. And, she’s made close friends in her community.
When choosing a residence, what features are important? Do you want to rent or own? What are your options for transportation? Must you live near a major airport?
What are the centers for socializing? We are social creatures. We need friends. Active adult communities may be the bridge to new people in your life.
Consider the simple pleasures of life. Can you walk to the store, the movies, local shops, and your favorite ice cream or coffee shop? What are the recreational options? What cultural
options are available? The little things really add up.
When you’ve narrowed down your locations, visit for at least a week or more if possible. Vacationing is one thing; relocating is another.
Talk to folks who live there. Do you like the restaurants, the social climate? And what is the senior center like? Live like a local, because if you take the plunge, you will be a local!
Ideally, visit when the weather is less than tolerable. You can’t beat vacationing in Phoenix in January, but what about July? Will you be OK with Minnesota in the winter?
More importantly, what is the access to quality health care? About 77% of older Americans have two or more chronic conditions, according to the nonprofit National Council on Aging. Can
you quickly find a primary care physician who takes Medicare, or is there a long wait to see a doctor?
If you are a person of faith, attend services at the religious institution you may want to join. If your religion is an important part of your life, it should be represented in your community. If not, relocation could be problematic.
My goal is to get you thinking. How you answer these and other questions will point you in the right direction and help determine the ideal home and location for you.
But let me add one note of caution. No place is perfect. There will be trade-offs. You can compromise on the wants, but the necessities should take precedence.
Finances will loom large in retirement, especially income needs. For some, we’ve been working toward your goal. For others, our team can assist with the mathematical part of the equation.
We’re here to help. I stress that often. So please take advantage of us as your go-to resource.
One question you must answer–can you trade your friends, familiar surroundings, and your favorite cultural institutions and sports teams for the unknown. Expect an adjustment period.
Adventure may await, but the unfamiliar can produce stress and anxiety.
I hope you’ve found this review to be educational and helpful. As always, I’m honored and humbled that you have given me the opportunity to serve as your financial advisor. If you have
any concerns or questions, please feel free to reach out to me at firstname.lastname@example.org or call me at 856-914-1449 and we can talk. That’s what we’re here for.