CHOOSING THE RIGHT COURSE DURING MARKET VOLATILITY
ADAM PAULSON Senior Vice President, Financial Advisor Partner Programs
When it comes to managing your long-term investment strategy through market volatility, the omnipresent advice of “stay the course” is as comforting as a steel wool blanket. Clients hate hearing it, and honestly, most advisors are sick of saying it. Even if the old adage remains mostly true, if “stay the course” is where the conversation ends with your financial advisor, you should probably start looking for a new one.
Conversations you should be having with your financial advisor
A large downturn in the market causes lots of anxiety for investors, but it also creates a multitude of financial planning opportunities that warrant further discussion. Here are a few strategies your advisor should be talking about with you right now:
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ROTH CONVERSIONS Given the current tax reprieve that is due to sunset in 2025, Roth conversions were an attractive strategy before the downturn. Now, the opportunity has been amplified. If you convert an asset that has lost 20 - 30% of its value, you can save a significant amount in taxes once the asset recovers. ACCELERATE YOUR ACCOUNT CONTRIBUTIONS If you’re still working, you should consider accelerating your yearly contributions to several retirementsavings or investment accounts while the market is down. Start by taking an inventory of your accounts and familiarize yourself with their respective yearly limits and flexibility of investments. Look for defined contribution plans such as a 401(k) or 403(b), Individual or Roth IRAs, and Health Savings Accounts (HSAs) to identify the best opportunities for increased savings and investment options.
HSAs are a particularly beneficial, and misunderstood, investment vehicle. They have triple tax advantage: Adding money
from your paycheck reduces your tax liability, you don’t incur taxes while that money grows, and there are no taxes for withdrawing funds for qualified medical expenses. And, unlike a Flexible Spending Account (FSA), an HSA is not a “use it or lose it” benefit.
THE PANDEMIC PLAYBOOK | 2020
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