December 7, 2022

Do Politics Belong in Retirement Planning?

Retirement savers can fall into a “wealth effect” trap, meaning they take their cues from headline numbers like the performance of the Dow Jones industrial average rather than the returns on their own portfolio. The risk is that investors could be too cavalier when stocks are soaring, then be unprepared when they subsequently drop.

The flip side of that tendency is alive and well, too. Often, advisers say, they function as a sort of de facto therapist, urging clients to look at the big picture and not to panic.

“People get scared and say, ‘This is different’; people say, ‘This is so bad for the stock market, I feel like I have to get out,’” said Mitchell Goldberg, president of ClientFirst Strategy in Melville, N.Y. “You have to remind somebody you’re in this for the long term, you’ve already made an asset allocation,” he said. Unwinding market positions in haste can lead to losses, Mr. Goldberg said.

Retirement-planning experts say it’s less important that you have the same 2020 campaign bumper sticker as your adviser than that the adviser be able to articulate why and how events in Washington — tax legislation, regulatory changes, monetary policy and the like — influence his or her investing strategy.

“In my practice, I talk about how changing political winds can impact the economy or the markets,” Mr. Kayes said. “In our business, you have to see all sides — you don’t want to put blinders on.”

Tim Maurer, director of adviser development at the St. Louis-based Buckingham Wealth Partners, said dealing with mounting worries — about the pandemic, the economy and the future more broadly — was increasingly just part of the job for retirement planners.

“We train advisers to navigate discussions with clients that are emotionally driven — and that’s a lot of them,” he said, especially for people who expect to retire soon.

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