Market pullbacks often create planning opportunities for thoughtful investors. With this in mind, we have identified Nine Key Strategies to Consider During the Market Pullback:
1. Make your IRA and retirement plan contributions now.Why wait until the end of the year when you can make these contributions at a tradable low?
2. Consider Roth conversions.Market declines effectively provide a tax break on top of the many benefits of a Roth IRA. Don't forget about Back Door Roth conversions as well.
3. Put idle cash to work strategically in today's discounted market. Many clients have been accumulating cash while searching for an attractive entry point into the market. While pinpointing the exact market bottom is impossible, the current market pullback offers attractive entry points for long-term investors. Consider a disciplined dollar-cost averaging approach to methodically build positions at these reduced prices, potentially enhancing your future returns when markets eventually recover.
4. Consider your cash flow. Slow down (or stop) distributions until the market recovers. This is where a solid Plan B can come in — look to alternate sources of income for some. It has occurred with an increase in your Social Security benefit due to the Fairness Act. Also, consider cutting back expenses for the time being. And confirm that your liquidity is still appropriate and that your emergency fund is in place.
5. Consider delaying retirement until the market is stabilized. Drawing down your portfolio at this time may slow the growth of your assets.
6. Consider rebalancing your portfolio by selling overvalued and less desirable positions or rotating to areas designed to weather volatility. These areas could include credit opportunities, special situations, hedged equity, and fixed income.
7. Consider tax loss trading with pullbacks across the market and the technology sector. However, please be careful of the wash sale rule when you sell equities. This rule bars taxpayers from deducting losses on securities that they replace within 30 days.
8. Consider becoming more aggressive with your asset allocation Strategy; if you have a long-term time horizon and the proper temperament to handle volatile markets,
9. Review gifting strategies in light of the declining market. Some strategies make more sense when assets are depressed, such as gifting appreciated stock and funding trusts. Additionally, annual gifting of up to $19,000 per recipient allows you to transfer wealth tax-free while potentially reducing your overall estate tax liability. Also, review the impact of declining markets on an estate if in probate and distributing assets.
Remember that market pullbacks, while uncomfortable, are a normal part of the investment cycle. Our Investment approach is deliberately designed to weather these periods, and we remain focused on your long-term financial goals. We are here for you during this market volatility—please get in touch with us with any questions or concerns about your portfolio.
The views stated in this letter are not necessarily the opinion of Cetera Advisors LLC. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable;. However, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.
Converting from a traditional IRA to a Roth IRA is a taxable event.