Plan Now So You Won't Ever Need to Panic


401k, Emergency Fund, Must Have Documents, Trust, Will


May 27, 2021

The past year has been a crash course in the need to plan for life’s What Ifs. A fast and furious bear market for stocks. A global virus that us all more aware of the fragility of life.  

All of that is beyond our personal control. But what is very much in our control is whether we were able to calmly live through the tumult, without panicking.  Beyond the emotional wear of panic, there can also be a very real financial cost. 

Morningstar Investment Management recently issued a report that found the majority of the more than 500,000 401(k) participants it studied did not make any big changes to their asset allocation during the worst of the early 2020 bear market. That is fantastic.  

But for participants who did decide to make a change, it seems to have cost them plenty of money. Morningstar found that the common move was to sell stocks. That may have felt good in the heat of the bear market. But Morningstar estimates that those accounts ended up the year with a return that was around 7.5 percentage points less than if they hadn’t made a change. 

We don’t know for sure why those retirement savers felt the need to change their strategy, but panic seems a reasonable candidate. 

If you made a move during the bear market, I want you to spend some time using one of the many online asset allocation tools available. (There’s probably one offered by the company that handles your 401(k) plan). The tools will help you figure out the best long-term mix of assets for your retirement savings. Once you’ve settled on the right mix, I hope it will make it unnecessary to panic when the next stock bear market arrive. 

There are so many other ways in which a bit of planning for “what ifs” can remove the need for you, or your loved ones to panic. 

  •      Whatifyou get really sick? A will is great if you die. It will help your family. But as we saw during the pandemic, severe illness can strike at any time, and leave us incapacitated. There is no excuse, no reason good enough to not have the other essential Must Have Documents. An advance directive that spells out the care you want if you can’t speak for yourself. A health care proxy/agent who will be your voice with medical providers if you can’t speak for yourself. And a durable power of attorney for finances will allow someone you appoint to handle your bills etc. if you are ever too sick to keep up with it all.Watch this video to learn more. 
  •      What if you die?If there is anyone in your family dependent on your income—spouse, partner, kids, parents, siblings etc.—please tell me you have term life insurance. There is simply no excuse to not take care of this.
  •      What if you get laid off?An emergency fund is the best medicine to keep panic out of your life. And that is what I wish for you. Always.

 

Suze Recommends


Life Insurance, Family & Estate Planning


Life Insurance Coverage is Necessary

Read Now

Saving


Your Ultimate Savings Opportunity Starts Now

Read Now

Saving, Investing, Retirement, Family & Estate Planning


Podcast Episode - Ask Suze (and KT) Anything

Read Now