Protect yourself in an economic downturn

 We are in an economic turndown; inflation is here and some of us are wondering what to do. Based on past experience one thing that many people will do is panic. The investment community will tell you that the stock market is neutral and unemotional. That is not true, because stock prices are driven by humans who are emotional and who do things that are not logic. If you are invested in the stock market, either inf mutual funds or stocks, don’t Panic. Historically, those who remain calm and stay the course with their investments are rewarded with a big bounce in due course.

Remember that in the past few years your stocks have gone up. The percentage of loss in this cycle is nowhere near the great percentage of gains from the past few years. We can not predict what will happen, but acting calmly is bound to serve you well. Do not panic is the first rule of protecting your long-term financial health in a downward trending market.

If you experience losses in retirement investments, you are not necessarily in the poor house, especially if you consider alternate sources of wealth before selling stocks that are down. We are facing a labour shortage especially of skilled labour, so if you can think about working longer or going back to work to bridge through the economic downturn. If your investments are your only source of income, then if you can borrow from your home equity, or assess some of the other best and worst sources of emergency money.

It is almost certain that you are much better off in a market downturn if you have already created a highly detailed and completely personalized retirement plan. Just make sure that if you have a plan, that you ignore the markets and keep to the plan. A plan enables you to quickly run different scenarios and really assess the impact to your near- and long-term financial health.

Now may be the time to make some minor adjustments to your future projections. You may want to raise your inflation assumptions slightly, lower your anticipated rates of return a bit, and maybe even look at spending.

As part of our plan, we may have decided to withdraw a fixed percentage from our investment accounts throughout our retirement. However, it may be a better idea to adjust your withdrawals depending on economic conditions. If:

·   Stocks are high and inflation is low, you can withdraw more

·   The market is down, and inflation is high, then you will want to withdraw less