| It's the most common question I've been discussing lately with financial advisers, family members and even readers of this newsletter: What are you supposed to do if a recession threatens to wreck your retirement plans? The chances of one in the next year surged to 38% in the US, according to the latest forecasts from Bloomberg Economics. Analysts see similar scenarios playing out across the globe, with contractions expected everywhere from Europe to Japan to Canada. At the same time, US inflation is at its highest level in 40 years while the country's equities just suffered their worst first half since 1970. It's an incredibly frustrating — and perhaps frightening — situation for people who worked hard and saved money for decades, only to have the economy and markets short-change their retirement. Unfortunately, I don't have any easy answers for people in this boat. But what I can offer are some suggestions that Bloomberg's personal finance team (most notably my colleague Suzanne Woolley) have gathered over the past few weeks for those who are at or near retirement right now. First: Avoid making any sudden moves. The economic news is pretty dismal, but remember that successful investing is about taming your emotions, staying the course and strategizing ways to avoid selling at a loss. If you are in a position where you need to sell stocks, Suzanne has some suggestions for how to use your losses to lower your taxes. And remember that the long-held 4% rule for retirement withdrawals has come under serious scrutiny lately. Second: Ask yourself some hard questions about work. If you're planning to retire soon, could you keep working for a few more years? If you can, one expert recommends asking for a raise, even if you don't intend to stick around for much longer. Yes, it looks like economic headwinds are going to strengthen in the months ahead. But the labor market is still tight, workers are in demand, and your long-honed skills hopefully will be, too. If you do keep working, you may be able to delay taking Social Security, which could boost your income later in life. For every year above full retirement age (that's 66 or 67, depending when you were born) up until 70, future monthly benefits increase 8%. That means that if your retirement age is 66 and you wait until 70 to claim, you end up with 132% of the monthly benefit. Even if you simply cannot keep working full time, or you've already retired, you might try what some are calling "returnships," effectively flexible arrangements for retirement-aged people who want to stay active while still earning some cash. Third: Reassess your housing needs. A few weeks ago, a reader who recently retired and moved to a new city asked us how long he should wait before buying a home. Given persistently high housing demand and limited supply, the adviser we consulted about this reader's dilemma told us he could end up ahead if he continued to rent, at least for a while. Others have resurfaced an age-old idea: downsizing. It can be hard to say goodbye to a large home, but you may thank yourself later. Do you have any other questions about retiring soon, or even not so soon? Email me and I will try to get them answered by a financial adviser and then published in subsequent editions of this newsletter. — Charlie Wells In Bloomberg Opinion this week, Alexis Leondis weighs the pros and cons of leveraging your stocks to buy a home: It's a risky strategy, especially given how volatile stocks are. But there are some real advantages, and it could actually be a worthwhile move for a careful borrower with a sizable portfolio. The most important thing to remember, though, is that borrowing against investments should never be used to overextend, or buy a home that's more than you had planned on. Read her full argument here.
Is it safe to have all your money at one financial institution? Let's say I wanted to have a savings, checking, Roth IRA, manual investment account and automated investment account. Is it smart to have all of those in the same institution? I'm a huge fan of being able to see all the money in one place but want to be mindful of any risks. — Thomas Schwab, 24, Virginia It is safe to have all your money at one financial institution provided you have implemented some criteria. For bank deposit accounts such as a checking or savings account, your financial institution should be a member of the Federal Deposit Insurance Corporation (FDIC) and you should keep your account balances below the $250,000 insurance limit for each account-ownership category. For investment accounts, your financial institution should be a member of the Securities Investor Protection Corporation (SIPC) and also carry an additional bond if you exceed $500k per account ownership category. Additionally, it's recommended you confirm that your custodian and not your advisers provide you with your reporting and statements. The notorious Ponzi scheme run by Bernie Madoff happened in large part because Madoff was able to create his own false reporting on investment accounts for his firm. — Byrke Sestok, financial planner, Rightirement Wealth Partners Send us questions about your own financial dilemmas to bbgwealth@bloomberg.net - Levi Strauss reports earnings today.
- The US Bureau of Labor Statistics publishes unemployment figures Friday.
- Inditex holds its annual general meeting Tuesday.
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