2022 was a very turbulent year for the stock market. With speculation at arguably all time highs in many asset classes, any bad news was going to stir up a downturn. The Fed had to initiate this slowdown in order to fight off inflation. Everyone was feeling the pain of inflation with rising food costs, fuel costs, material, housing, etc.
The Federal Reserve raised interest rates significantly to slow demand by making debt more expensive. This makes larger purchases less attractive as they become much more expensive to afford. As demand falls, this causes asset prices to fall with it. The markets took a sizable loss including 50% + losses for some tech companies. In periods of uncertainty the goal is to limit risk and have access to cash. This was our recommendation for most of our retirement clients. The goal was to focus on guarantees, fixed income, and having cash on the sidelines to offset risk, or buy in at a discount.
How has all this affected retirement accounts? Well if your account was invested aggressively, these losses could have make a serious impact on your portfolio. Also, as inflation has risen, monthly expenses probably have as well. If you were solely relying on one fixed income stream, it may be harder to pay the bills each month. Ensuring there is a balance of guaranteed income, and investments to outpace inflation is crucial for a comfortable retirement. Many people retiring in Pittsburgh will need access to cash as well. Whether it it to repair your home, fix a vehicle, invest in a new opportunity, or healthcare, cash is king during a recession. When it comes to retirement, focus on income, asset management, and access to cash. This is the recipe for success when it comes to your IRA and investment assets.