Financial Planning In The Coronavirus Economy

As we’ve discussed many times before, both in person, as well as in our writings, investment risks and expected rewards are related. We are certainly experiencing that now. Here are three encouraging thoughts to keep you grounded right now.

1. PREPARATION BEATS PANIC – While conversations about risk and return during stable times may seem abstract to you, that perhaps we’re “checking the boxes” professionally, we intentionally do this to understand YOU and assess your goals and risk tolerance, in order to invest each account into its most appropriate model. You might have a completed financial plan or retirement plan that drives the conversation about necessary returns to achieve your goals. Even if you do not have a formal plan, our portfolio modeling conversations always center on financial planning principles, i.e. your age, circumstances, risk tolerance, income needs household goals, and the intent for each account.

We have already collaborated with you to help identify the right balance to strike between accepting risk and “reward”, or necessary returns for each account. We then build and manage each broadly diversified portfolio using thoughtfully-researched investment positions. We’ve already done that…together.

We’ve already prepared the hard work on the front end to assemble your purpose-driven portfolios. Today’s hard work is recognizing that your investment plan is in place, we have accounted for periodic declines, even severe ones, and “active patience” is the best strategy for riding out this current environment.

2. PATIENCE WINS – Our advice on investing during volatile times remains the same: patience wins. That is fact-based going back 75 years to the end of World War II, i.e. the ‘modern investing era.’ Numerous studies conclude that sticking with initially-modeled portfolios through market cycles leads to investment success. Risks do drive expected returns.

However, we also understand that for some people fear may be stronger than greed, which motivates some clients to sell or change models for fear of “losing everything.” These few clients usually make emotional portfolio changes at or near market bottoms. They receive the initial satisfaction that they “did something” to preserve their capital; though ultimately most of these clients wind up financially lesser off because they either don’t go back into their previous models, or they re-enter after the news has brightened and the markets recovered past their sell point. Consider this:

As a train needs its engine to move, markets require risks to drive them onward and upward.

Rather than focusing on daily headlines and account balances, try to understand that your portfolios are already geared to weather today’s declines, and to recover when the recovery happens. Since 1945, the market has always recovered, so why should this time be any different? Ben Carlson, author of “Don’t Fall For It: A short History of Financial Scams,” wrote:

“Every successful investor must understand there is a sacred relationship between risk and reward. There is no proven way to earn a high return on your capital without taking some form of risk nor is it possible to completely extinguish risk from your investments.”

We simply define “high” in the above statement as anything above cash returns, and specifically not inappropriately aggressive. That would be imprudent.

3. WE STAND WITH YOU – As we work our way through the pandemic’s effects on our social lives and your portfolio, you might be wondering if your risk tolerance isn’t what you thought it would be during a crisis like this. If so, consider yourself normal! Even those who cognitively understand the wisdom of staying the course, emotionally it’s not easy for some. We still suggest that you reassess after the storm has passed. You wouldn’t expect someone to assess the damage to your paint and roof in the middle of a hailstorm, so why do that with your portfolio? Sit tight, let it pass. Once things stabilize, make sure to let us know that you’d like to revisit your risk tolerance and goals in order to ensure your portfolio modeling is correct.

We cover this during your Annual Review and periodic conversations, but if it’s on your mind now, please contact us. Together, we’ll objectively look at your situation and feelings to continue to chart a sensible course forward.


As you may know, Congress and the Treasury Department have worked together to provide relief to individuals and small businesses, such as the CARES Act. Click here for an excellent CARES Act Commentary by Steve Leimberg, a well-regarded author in our field.

Some highlights:

  • Tax filing deadlines have been extended to July 15.
  • Retirement contribution deadlines, such as IRAs that had an April 15 deadline, are also moved to July 15, with some deadlines extended to tax filing dates on extension.
  • Required Minimum Withdrawals are suspended for 2020. You do not need to take them. If you have already taken your 2020 RMD, and would like to put it back into your IRA, you are able to do so up until July 15. This does NOT apply to RMDs taken in the month of January, only for those taken February 1 and later. Further, RMDs from non-spouse beneficiary IRAs are suspended, but if you’ve already taken the RMD, you can not roll it back into the IRA, since non-spousal rollovers are disallowed anyway.
  • Mortgage Forbearance – While recent regulations have allowed for certain homeowner’s mortgage forbearance relief, our mortgage experts warn about being careful in this area. It should only be used as a last resort, especially since it has not been made clear how your credit rating may or may not be affected. It could be very difficult for a credit bureau to determine if your situation is reasonable, or a late payment. Be careful, check with a mortgage expert before going that route.
  • Conversion to Roth IRA – This could be a good year to convert part or all of your IRA to a Roth IRA: 1) if your 2020 income is expected to be much lower, then perhaps the tax cost of conversion makes sense, and 2) converting existing IRA assets at lower market prices could provide you with a significant tax benefit as the assets recover in the tax-free Roth.
  • Withdrawals from Qualified 401k/ERISA Retirement Plans – There are many, so if you need relief by accessing your retirement account with us or your company-sponsored plan, PLEASE contact us first as there are also potholes to consider.

Finally, Winston Churchill wrote, “Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.” We shall get through this, and patience is one of our greatest allies. Stay strong, stay healthy.

Jeff Garell, CFP®
Michael Campbell
Bob Emmer, CFP®

Contact us with any questions at 1-888-969-7500, [email protected] or via this form