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Time for a Reality Check: Are You Still on Track to Meet Your Goals?

The pandemic has turned our daily routines upside down. These questions can help you see how your finances have held up—and whether you might need to adjust them too.

IT’S HARD TO COUNT ALL THE WAYS life has changed this year: Many of us are working remotely (and millions have lost jobs). We're helping our kids with virtual learning, canceling vacations and limiting our interactions with friends, all while waiting for a return to life as we knew it—or at least to some sort of new normal.

Amid all this uncertainty, financial questions loom large: How are our investments holding up—and should we be adjusting them as well? Will we still be able to live the life we want in retirement?

Like many others, Terese and David Zingg were concerned this past spring when the virus spread and the stock market began to wobble. The couple, from Gloucester, Massachusetts, were especially nervous because David, 66, had already retired as a sales manager at a local boatyard, leaving them to live on Terese’s salary alone.

But after long conversations with Mary Mullin, their Merrill Financial Advisor, they emerged more confident in their financial strategy. “We talked through cash-flow models and tactical shifts, such as selling some investments to raise enough cash for the short-term so that they wouldn't have to worry,” Mullin says. The Zinggs also revised travel expenses downward (not too hard, with much of the world shut down). “Even in the darkest days, we felt our plan was solid,” Terese says. “We knew we had planned the best we could.”

Whether you’re still working or already retired, you probably share some of the same concerns the Zinggs had. To see how your financial plans have weathered the economic effects of the pandemic, start by asking your advisor the following questions. Then discuss what steps you might want to consider to keep your plans on track as the economy—and your daily life—gradually begin to recover from the effects of the coronavirus.

On the left, there is a beige graphic with black writing, “STILL WORKING.” On the right is a photo of a Black woman in a wheelchair, in an office, sitting at a table looking at a portfolio.

Do I need to save more to be able to retire at the age I want?

The first step in figuring out how the pandemic may have affected your retirement readiness is to do a reality check: “Ask yourself: Are you on track or off track and to what degree?” says Joe Curtin, head of Portfolio Management for the Chief Investment Office, Merrill and Bank of America Private Bank.

“Postponing retirement by two or three years can change the retirement math and give you a lot more confidence.”—Merrill Financial Advisor Mary Mullin

Many people have experienced some form of financial pressure, whether due to furloughs, layoffs, a reduction in pay or a small business suffering in the disrupted economy. Your advisor can help you assess where you stand and update you on provisions of the Coronavirus Aid, Relief and Economic Security Act ("CARES Act"), such as coronavirus-related loans and withdrawals from qualified retirement plans, that might help you manage immediate financial challenges.

Next, look at your investments—but don’t make any sudden moves. “Staying invested helps to ensure that you can take advantage of any market bounce that may occur,” Curtin points out. If you find you’ve fallen behind in your progress toward saving for retirement, think about increasing contributions to your retirement plans as soon as you can afford to do so.

Ideally, you should be taking full advantage of a company match, notes the Zinggs' advisor, Mary Mullin. (The federal Setting Every Community Up for Retirement Enhancement ("SECURE") Act, passed in 2019, made a number of changes to encourage retirement saving. To learn more, read 10 Things You Need to Know About the SECURE Act.)

Another option is to consider delaying your retirement by a couple of years to extend the amount of time you have to save, says Mullin. “Postponing retirement by two or three years can create extra cash flow, delay withdrawals, change the retirement math and give you a lot more confidence.” (For further ideas, read Save More for Retirement with These Five Tips.)

“Staying invested helps to ensure that you can take advantage of any market bounce that may occur.”—Joe Curtin,head of Portfolio Management for the Chief Investment Office, Merrill and Bank of America Private Bank

What about my other financial goals?

To stay on track to help meet your other financial goals, work with your advisor to make sure you’ve prioritized them correctly, given the current circumstances, says Curtin. Organize them in three different spending buckets—essentials (things like maintaining a minimum lifestyle, an emergency fund and covering medical costs), important goals (like helping grandchildren pay for education or maintaining your philanthropic giving), and aspirational goals (true luxuries like art collecting or buying a second home). Particularly within the last two categories, you may find places to cut back. “This is a great time to talk with your advisor and re-evaluate your priorities,” Curtin notes. Together you can look for tradeoffs and creative ways to temporarily restructure your assets, saving strategies and expenses to help meet your needs.

On the left, there is a beige graphic with black writing, “ALREADY RETIRED.” On the right is a photo of an older man in activewear, taking a break from a bike ride through the woods. He is casually leaned over the handlebars.

How can I maintain a consistent stream of income?

A solid retirement plan focuses on cash flow, says Mullin: “It’s not necessarily about when you have X dollars in the bank—it's about do you have the cash flow each month to live the life you want to live?” Ask your advisor to review all of your sources of cash, which can include Social Security, pensions, part-time work, and dividends and interest from your portfolio. If you’re worried that recent volatility may have reduced the value of the funds you can draw on for your income needs, you may want to consider increasing your holdings of dividend-paying stocks, says Mullin. Though some companies have suspended dividends during the pandemic, generally dividend stocks have the potential to provide a reliable source of income.

Are there ways to reduce my income needs in retirement?

With people staying closer to home during the pandemic, spending on things like eating out and entertainment have fallen considerably. If you’re worried about outliving your retirement savings and want to reduce your expenses further, you could look for ways to refinance any debt you hold at today’s record-low interest rates. Consolidating your credit card balances at a lower rate, for instance, could help you pay them off faster. Or you might look into refinancing your mortgage. A lower monthly mortgage payment could help you pay off other higher-interest debt and give you more cash to put toward other expenses. “You might also consider downsizing to a smaller home, potentially moving to a lower-cost locale and pocketing the difference to help cover monthly expenses,” suggests Mullin.

On the left, there is a beige graphic with black writing, “A QUESTION EVERYONE SHOULD ASK.” On the right is a photo of a man and woman sitting in a kitchen, at the kitchen table, discussing something on a laptop screen.

Are there investment opportunities I can take advantage of now?

There’s no question the economy has been hit hard by the pandemic, says David Koh, an investment strategist with the Chief Investment Office, Merrill and Bank of America Private Bank. But the market, buoyed by stimulus from the Federal Reserve and Congress, has recovered some of its losses—and many sectors tied to changing consumer habits show promise.

In the near term, companies with strong market share, healthy balance sheets and the ability to pay an attractive and consistent dividend are a focus, says Koh. Looking ahead to the post-coronavirus environment, promising sectors also include technology, robotics, artificial intelligence, cloud computing and big data. “And don’t forget healthcare: medical suppliers, genomics and wellness, as well as logistics. All of those areas will be critical in the years ahead,” Koh notes.

Whatever the new normal brings, adds Curtin, there’s one clear takeaway from the events of 2020—the value of regularly reviewing your strategies with your advisor. As the economy and the markets recover, volatility will likely continue—and investment opportunities may emerge. Having someone to guide you through the ups and downs can help you keep your plans on track.

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Information is as of 09/03/2020.

Opinions are those of the author(s), as of the date of this document and are subject to change.

Investing involves risk including possible loss of principal.

Past performance is no guarantee of future results.

The Chief Investment Office (CIO) provides thought leadership on wealth management, investment strategy and global markets; portfolio management solutions; due diligence; and solutions oversight and data analytics. CIO viewpoints are developed for Bank of America Private Bank, a division of Bank of America, N.A., (“Bank of America”) and Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S” or “Merrill”), a registered broker-dealer, registered investment adviser and a wholly owned subsidiary of Bank of America Corporation.

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Case studies are intended to illustrate brokerage products and services available at Merrill and banking products and services available at Bank of America. You should not consider these as an endorsement of Merrill as an investment advisor or as a testimonial about a client’s experiences with us as an investment advisor. Case studies do not necessarily represent the experiences of other clients, nor do they indicate future performance. Investment results may vary. The investment strategies discussed are not appropriate for every investor and should be considered given a person’s investment objectives, financial situation and particular needs.


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