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Making Your Money Last

Staying Calm in a Crisis

Keep a stock allocation that you can live with and still sleep well.

Like everyone else, I’ve been hunkering down trying to get used to this sometimes-stressful new normal as my retirement routine has been turned topsy-turvy. I practice my yoga online, and I’ve replaced my spin classes with spins around the neighborhood on my bike. I smooch the phone to send FaceTime kisses to my grandchildren, and my husband and I stay connected with family members via Zoom and Google Duo. As one of my shelter-at-home projects, I’ve tackled Ron Chernow’s biography of Ulysses S. Grant, an intimidating 1,000-page tome.

But one thing that hasn’t changed or stressed me out has been my finances. For that, I give full credit to two key nuggets of Kiplinger wisdom, which proved golden when the stock market took its coronavirus plunge.

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For one thing, I had waited as long as possible to take Social Security benefits, which maximized my payments and provided stability as the market swooned. “What you’re looking for is a steady stream of income in retirement,” says Wade Pfau, professor of retirement income at the American College of Financial Services, “and step one in that discussion is delaying Social Security.”

Unless you have a reason for claiming early, don’t feel as if you’re missing out by waiting. Let’s say that instead of starting payments at age 62 you wait till the maximum age of 70. “Think of the benefits you give up from 62 to 69 as premiums for a lifetime annuity that starts at age 70, when you can take out an additional 76% a year,” says Pfau. “That’s a much better annuity than you can buy commercially.”

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Beyond Social Security and pensions, retirees who may be strapped for cash could tap what Pfau calls buffer assets—things such as a permanent life insurance policy or a reverse mortgage. Refinancing your existing mortgage or even asking your current lender for a lower rate could also free up cash (see How to Protect Your Portfolio).

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The key is to avoid depleting your stock holdings in a down market, which could also mean cutting back on spending. That may be easier than usual in the current environment, but “we would take it even further than trimming discretionary expenses,” says Ric Edelman, founder of Edelman Financial Engines. He recommends performing triage on your bills to see which ones could be delayed if necessary. “The only bills you need to pay right now are for food and medicine,” he says. And if you must dip into your investments, make withdrawals from your bond portfolio rather than selling stocks, says Edelman.

Sleep tight. That brings me to the second nugget of Kiplinger wisdom that’s made my life calmer: Keep a stock allocation that you can live (and sleep) with. Because I’ve done that, I’ve watched the market gyrations with feelings ranging from curiosity to amazement, but not with panic or dread.

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Should retirees consider scooping up bargains? “Count up all your assets and liabilities, including spending needs,” advises Pfau. “If you have more assets than you need, or cash that’s not vital, it could be a buying opportunity. But I’d be cautious about telling retirees to throw cash into the market right now.”

One exception might be to rebalance your portfolio to your preferred allocation. “Rebalancing helps you protect your gains and buy low,” says Edelman. If you’re leery of investing a chunk of cash, he advises that you dollar-cost average—adding, say, $1,000 each week for 10 weeks (or each month for 10 months) rather than $10,000 all at once.

Aside from taking an occasional look at my own investments, I’ve devoted some of my sheltering time to my ongoing task of reviewing our family finances. My husband is the accountant in our household, so I sat down with him for an hour and a half to go over our taxes. I got up to speed on our bank’s bill-pay app and updated my “where things are” file. Still on the list: a visit to our lawyer to update our wills, which we’ll get on the schedule as soon as we can meet in person.

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