Should I Rebalance My Portfolio in a Bear Market?
Today I answer questions on a broad range of topics from paying off a mortgage on a rental property to determining the right balance for investment when there is a significant pension to whether to use a loan to pay for life while the market picks back up. Listen in to hear my thoughts on these questions so that you can not just rock retirement but rock life as well.
Update your net worth statement (even if it is painful to look at) How often do you update your net worth statement? It is important to do so annually or every 6 months. I recommend this exercise because your net worth statement is a fantastic tool that shows you the financial impact of the decisions you make.
However, due to the recent market volatility, opening your monthly investment statements isn’t as much fun as it used to be. Regardless of this fact, it is still important to understand where you stand financially so that you can work to improve your financial decisions.
Should Tyler pay off his rental property mortgage? Tyler is still young, has no debt besides his rental property, and is a great saver. He is wondering if he should pay off the mortgage on his rental property. The traditional wisdom is to keep the mortgage. Since he has a low-interest rate, mathematically it doesn’t make much sense to pay it off. But that doesn’t mean he shouldn’t pay it off.
These types of decisions are rarely about math. It is important to factor in personal feelings as well. Tyler needs to consider all the factors involved and come to a decision that is uniquely his own. There is no wrong answer to this question. What is most important to consider is which choice will give him peace of mind.
Should all of Adam’s investments be in equities since he’ll have a pension? Adam will soon retire from the military with a $70,000 per year pension. He feels that the traditional 60-40 retirement portfolio won’t be aggressive enough since he has such a large pension. So, he is wondering if all his investments should be in equities.
Instead of building your portfolio first, start by creating a retirement plan of record to forecast what you need to live a great base life. Consider your income from social capital (Social Security, pension), financial capital (investments), and human capital (work).
Once you understand how much financial capital you will need, then you can build your pie cake which consists of an emergency fund and a secure income floor with 5 years of spending. Since you have 5 years of prefunded income, then you can invest as aggressively as you would like. This system is a fantastic way to help guide your spending in retirement.
OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN PRACTICAL PLANNING SEGMENT • [2:25] Opening your monthly statement isn’t as fun as it used to be
LISTENER QUESTIONS • [5:00] Should Tyler pay off his rental property mortgage?
• [9:40] Should all of Adam’s investments be in equities since he’ll have a pension?
• [16:50] Is there a method for deciding the best location to move to in retirement?
• [23:44] Using a loan vs. cashing out on stocks during a bear market
• [29:40] On reframing old age
• [31:38] Pros of cons of timing retirement
TODAY’S SMART SPRINT SEGMENT • [37:00] Update your net worth statement
Resources Mentioned In This Episode Boomer Benefits
Episode 412 – What Is a Retirement Plan of Record?
Episode 310 – Investing in Retirement: The Pie Cake
Rock Retirement Club
Roger’s YouTube Channel – Roger That
BOOK – Rock Retirement by Roger Whitney
Roger’s Retirement Learning Center
A portable order for life-sustaining treatment (POLST), or medical order for life-sustaining treatment (MOLST) in some states, gives instructions…