Think back to four years ago, when media outlets and economic pundits were doing their best Henny Penny impersonations.
The economic sky was falling. Whether Barack Obama or Mitt Romney was to be elected president, the United States would be unable to pay its bills. The stock market would drop to perilous levels, perhaps as much as 30%.
That level of drama went on for months.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Now here we are four years later, and the drama is on par with where it was then, but this time, we started hearing it even earlier.
My advice: Don't buy into it. In fact, I want to focus on taking the drama down a notch.
Back in 2012, if we all had a dollar for every time we heard the term "fiscal cliff," we'd each have an additional $10,000 in our savings accounts. It was brought up every day on every channel. Before then, the term had never been used.
For those who don't remember, at the time, President Obama and Congress needed to reach a deal on $500 billion in tax increases and across-the-board spending cuts. Federal Reserve Chairman Ben Bernanke coined the term "fiscal cliff" to warn of the dangerous drop-off the nation faced if no action was taken.
We worried about whether, as a country, we would be able to pay our bills. On a scale of one to 10, our drama level reached a 12.
No one in the media ever discussed, to any great degree, a scenario that would pave the way for the positive year the market actually experienced in 2013.
Remember that as we continue through this election cycle. No matter how dire the situation may seem, no one has a crystal ball to truly predict how the market may or may not perform. You're better off disregarding all the gloom and doom and focusing on your own financial situation.
In any year, regardless of whether there is an election, the key thing is to develop a financial strategy that allows for the ebbs and flows that occur in the market at any given time.
Whether you use a professional or do it yourself, create a financial plan that allows for some clarity on how much money you are really willing to lose and how much money you are potentially willing to lose, even if it's just paper losses. The last thing you want to do is create an investment plan with too much risk, causing you to hit your "uncle point" and potentially make decisions that could have a severe impact on your long-term plan.
If you do work with a financial professional, be sure that person communicates with you effectively during stressful and uncertain times so you're not making rash and drama-filled decisions.
Isaac Wright, president of Financial Dynamics & Associates, is a financial advisor and licensed insurance professional who has helped retirees for more than 15 years. He also is author of Navigate Your Way to a Secure Retirement.
Investment Advisory Services offered through Global Financial Private Capital, LLC, an SEC Registered Investment Advisor.
Yvette Hammett contributed to this article.
-
Cord Cutting Could Help You Save Over $10,000 in 10 YearsHow cutting the cord can save you money and how those savings can grow over time.
-
The '8-Year Rule of Social Security' — A Retirement RuleThe '8-Year Rule of Social Security' holds that it's best to be like Ike — Eisenhower, that is. The five-star General knew a thing or two about good timing.
-
You Were Planning to Retire This Year: Should You Go Ahead?If the economic climate is making you doubt whether you should retire this year, these three questions will help you make up your mind.
-
Are You Owed Money Thanks to the SSFA? You Might Need to Do Something to Get ItThe Social Security Fairness Act removed restrictions on benefits for people with government pensions. If you're one of them, don't leave money on the table. Here's how you can be proactive in claiming what you're due.
-
From Wills to Wishes: An Expert Guide to Your Estate Planning PlaybookConsider supplementing your traditional legal documents with this essential road map to guide your loved ones through the emotional and logistical details that will follow your loss.
-
Your Home + Your IRA = Your Long-Term Care SolutionIf you're worried that long-term care costs will drain your retirement savings, consider a personalized retirement plan that could solve your problem.
-
I'm a Financial Planner: Retirees Should Never Do These Four Things in a RecessionRecessions are scary business, especially for retirees. They can scare even the most prepared folks into making bad moves — like these.
-
A Retirement Planner's Advice for Taking the Guesswork Out of Income PlanningOnce you've saved for retirement, you'll need your nest egg to support you for as many as 30 years. For that, you need a clear income strategy, not guesswork.
-
Why Smart Retirees Are Ditching Traditional Financial PlansFinancial plans based purely on growth, like the 60/40 portfolio, are built for a different era. Today’s retirees need plans based on real-life risks and goals and that feature these four elements.
-
To My Small Business: Well, I've Been Afraid of Changin', 'Cause I've Built My Life Around YouWhile thinking about succession planning might feel like anticipating a landslide (here's to you, Fleetwood Mac), there are strategies you can implement to manage the uncertainty and the transition.
