Despite the slow reopening of the U.S. economy now underway, several surveys show that most people are still more concerned about their health than they are about their financial well-being. While those concerns are certainly warranted, it is important to remember that now is not the time to become complacent about your financial health.
We will get through this pandemic, but it will take time. Meanwhile, as the world adjusts, investors can take several proactive steps to strengthen their financial plan. Here are some planning strategies that are particularly helpful in the current climate:
• To ease your financial anxiety, revisit your wealth plan with a professional. Even if you have a solid plan, depending on your asset allocation, you should be prepared for your net worth to take a hit. But as long as you stay invested, the loss is merely a paper loss. It doesn’t become a realized loss until you sell. So if you can, hold firm.
• See that you are always well-connected to your assets and can access the digital tools available from your financial institution to help you navigate your portfolio from home. RBC Wealth Management Online provides increased support, accessibility and ease of doing business with access to your account information via computer or mobile device. Our financial advisors are also available to answer any questions clients might have during these turbulent times.
• Conduct a retirement income check-up and revisit spending priorities. This is especially important for retirees and near-retirees. Having a liquidity plan that includes access to a line of credit could be a vital safety net.
• Seek opportunities within your portfolio to tactically harvest losses for tax purposes. This can be especially effective if you have realized gains and see an opportunity to rebalance, trade up in quality, growth potential or even an opportunity to better align your portfolio with your personal values.
• Reduce your tax bill through financial contributions to charitable organizations and take advantage of the CARES Act tax deduction benefits. With the pandemic wreaking havoc globally, there are many ways for you to help organizations in desperate need due to the COVID-19.
• Consider a Roth IRA conversion. With a fall in portfolio values caused by market stress and a potential drop in personal income for 2020 — along with the elimination of the stretch IRA — makes a Roth conversion a top consideration for many people. Your financial adviser can help you determine if this strategy makes sense for you.
• Review your estate value and consider timely strategies that work well in in downward markets and in a low interest rate environment, such as annual gifting using depressed stock, intra-family loans, annual gifting, or trust strategies such as a Grantor Retained Annuity Trust.
• With so many of us stuck at home with time on our hands, current market conditions also present a perfect opportunity to revisit your estate plans. Pull out your will, trust, power of attorney, health care directives and review you beneficiary designations to see if there are any needed changes. Keep in mind that health care directives are needed for young adults as well.
• This is also a good opportunity to revisit your life and disability insurance policies to determine whether these policies still meet your needs; if not, look at opportunities to repurpose. Many of us have neglected this part of our financial health for years.
While these are unsettling and challenging times, it’s important that we don’t react out of fear. The decisions you make today will impact your long-term financial planning goals.
And remember, you’re not alone. Even in a world of increased social distancing, financial advisers can help you navigate these turbulent waters and ease your financial anxiety by helping assess if any of these strategies are right for you.
Angie O’Leary is head of wealth planning at RBC Wealth Management. RBC Wealth Management does not provide tax or legal advice. We can work with your independent tax/legal advisor to help create a plan tailored to your specific needs. Investment and insurance products offered through RBC Wealth Management are not insured by the FDIC or any other federal government agency, are not deposits or other obligations of, or guaranteed by, a bank or any bank affiliate, and are subject to investment risks, including possible loss of the principal amount invested.
RBC Wealth Management, a division of RBC Capital Markets, LLC, Member NYSE/FINRA/SIPC.