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Here are some of the questions we’ve been hearing and some of the information and guidance that we’ve been sharing:
What do the recent movements in the stock market mean for my short- and long-term savings goals?
Remember that this recent volatility comes on the heels of record gains. Although the market is down, your portfolio may still be in a gain position. This volatility is different from the recession of 2008. Then, the problems causing volatility were systemic. Current volatility is primarily due to the impact of the coronavirus on production and consumption, so experts are really asking when, not if, the market will rebound. What does that mean for your investments? It depends on your time horizon and how you were invested prior to recent market volatility. If you need to access your investments in the near-term you may experience a greater negative impact. If you have a longer time horizon, it’s likely that you could see a full recovery.
How much should I have in an emergency savings fund?
The general rule of thumb is to keep at least 3–6 months’ worth of living expenses in an emergency fund. Your comfort level may lead you to keep a different amount on hand. Below are a few factors that may lead you to keep more or less in your emergency savings:
|Single-income household||Multiple income household|
|More dependents||Fewer dependents|
|An aging home or older vehicles as unexpected repairs may be more likely||A rented home or newer vehicle where unexpected repaire expenses may be less likely|
I heard that interest rates were being lowered—should I refinance my student loans or my mortgage or consolidate my debt?
It may make sense to refinance or consolidate your debt. Check your current interest rates and monthly payments on your loan and compare to current rates that may be available to you. By taking advantage of lower interest rates, you could pay less in interest over the life of the loan and potentially lower your monthly payment. If you decide to refinance, be aware of any fees or closing costs you may need to pay.
Before you decide, ask yourself a few questions: Am I comfortable with how much I have in my emergency fund? Am I better off investing to take advantage of anticipated market rebounds instead of using that extra money to pay off my loans? If I decide to pay off my loans, what loan might I pay off first, which loan has the highest interest rate?
The deadline for filing and paying your 2019 federal income taxes has been extended to July 15th, 2020. If you’re expecting a refund, it may make sense to still file sooner so that your return can be processed and your refund can be issued. If you’re expecting to owe, it may make sense to delay so that you can keep more cash on hand in the event you may need it.
If retirement is on the horizon, this is a good opportunity to complete or revisit a retirement projection with an Ayco coach. This is also a good time to look at your investment allocation to see if it’s appropriate for your risk tolerance and your goals, is it time to rebalance?
It may be tempting to decrease your retirement savings rate if you need additional cash on hand. If it’s possible to continue contributing a consistent rate to your 401(k), that will have a more positive impact for your future needs—especially as you’re buying stocks while the price is low. If you do need to decrease your savings rate, try to continue contributing at least the percentage that your employer matches so that you don’t miss out on their contribution to your retirement.
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Updated for tax year 2020