Frothy Markets - Beware or Prepare? Ep # 178

Feb 8, 2021

Ask episode

Chapters

Transcript

Episode notes

Has the news about the ups and downs in the market lately got you a bit worried? You aren’t the only one. Many people are even thinking about pulling their money out in case there is a market correction. Does this sound like you? If so, you’ll definitely need to listen to this episode.

When you press play you’ll hear what would happen if you only invested at the market peaks, what to do with an inherited IRA, and what the benefits are of an umbrella insurance policy.

Outline of This Episode

[1:25] What if you only invested at market peaks?
[5:21] What to do with an inherited IRA?
[9:00] The benefits of an umbrella insurance policy

What if you only invest at market peaks?

Have you ever wondered what would happen if you invested at all the wrong times? Our retirement headline this week is from Ben Carlson who reflects in his widely read 2014 piece, What If You Only Invested at Market Peaks? In his newest article with the same title, Ben introduces a video illustration to turn his story of the world’s worst market timer into a timely cartoon about the rewards of patience and long-term thinking.

Ben responded to the pushback he got from the original article by explaining that while there are risks involved with any investment strategy, the most effective way to combat those risks is with a long-term investment mindset. Long-term thinking will give you the biggest margin of safety when investing.

Are frothy markets making you nervous?

The current market volatility has many people looking for an exit strategy. While I share their concern over the rapid growth we have seen over the past several months, this is why we have an investment strategy. Overvalued markets are no reason to deviate from your investment plan.

A properly invested retirement portfolio should already include a contingency plan for a market downturn. If you are worried about the market then now is a good time to consider your investment plan. You may want to dial back your stock exposure back a few percent to help you sleep at night. If you are within a few years of retirement, you should already be close to a retirement income portfolio of about 40-50% in bonds and cash. Are you worried about a market correction?

What to do with an inherited IRA

One listener writes about her daughter who inherited a 403B account. She would like to know what the best plan is for this unexpected inheritance. She could either take a lump sum or roll the money into an inherited IRA account which must be withdrawn over a 10 year period.

The answer to this question depends on her income. If she has a high income then she should spread the money over the 10 year period taking about 1/10 each year. If her income is not too high then taking the money now and paying the taxes on it shouldn’t be too much of a burden tax-wise. What would you do with such an inheritance?

Make sure to subscribe to my newsletter

If you have any questions for me, want to hear more about retirement planning, or would like to be first in line for free book copies from the authors that I interview, click here to subscribe to my Every Day is Saturday newsletter. This weekly newsletter is delivered every Thursday morning to remind you that every day is Saturday in retirement.