Elections and Your Retirement | Managing Market Uncertainty

In this episode of Retiring Today, Elections and Your Retirement, we dive into how market volatility is influenced by election cycles and effective strategies you can employ to safeguard your investments. Whether you’re apprehensive about the upcoming election’s impact on the stock market or curious about the potential changes to Social Security and how they might affect your retirement, we have insight and actionable strategies for you. 

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Elections not only shape the political landscape but often bring volatility to the financial markets. As discussed in this Retiring Today Elections and Your Retirement episode, understanding this volatility and preparing for its impact on retirement savings is crucial. Every four years, as the nation speculates on its leadership’s future, retirement portfolios face potential volatility due to the uncertain regulatory, economic and tax environment that might follow. Retirement Planners Loren Merkle and Clint Huntrods emphasize that presidential elections lead to market fluctuations, citing decades of data to support these trends. 

Historical View on Market Performance

Historically, the stock market displays increased volatility as elections approach. This is attributed to the uncertainty about government policies that may affect the economy and financial regulations. Since 1932, the average return on the S&P 500 has been lower in election years compared to non-election years. The apprehensiveness about possible changes in governance can cause investors to react more emotionally to the news, which might lead to short-term market swings. 

Strategic Retirement Planning

During this episode, Clint Huntrods shared insights on how he assists retirees in navigating these uncertain times by using a data-driven approach. By evaluating a client’s current portfolio, he was able to show how a typical election year’s volatility might impact their retirement funds, focusing on a real-life visit he had with a couple who had a million-dollar IRA invested in a 70/30 split between stocks and bonds. He proposed a more recession-resistant portfolio structure to minimize risks associated with market lows. This new strategy involved diversifying investments across different income needs and timelines—short, mid, and long-term—thereby safeguarding against immediate effects of market downturns while still eyeing some long-term growth. 

Election Outcomes and Market Reactions

Despite popular beliefs, the historical analysis presented during the show revealed that market returns are nearly equal regardless of whether a Republican or a Democrat is in the White House. This underscores the fact that while presidents may influence the market’s mood, the overall economic and market fundamentals play a more significant role in long-term financial outcomes. By focusing less on election outcomes and more on comprehensive planning, retirees can better control their financial destiny. 

Preparing for the Unpredictable

One of the key takeaways is the importance of being prepared for any market condition. Loren Merkle highlighted that, apart from election-related volatility, other events like health crises or economic downturns could prompt market dips. Effective retirement planning involves anticipating these events and creating a retirement plan that accommodates various scenarios, ensuring that retirees can remain financially secure regardless of the market’s state. 

Successful retirement planning doesn’t hinge solely on the performance of the markets during election years but on a well-rounded strategy that considers all aspects of a retiree’s financial life. By focusing on what can be controlled—such as investment strategy and distribution timing—retirees can face the future with confidence, irrespective of who is elected to office.

Source: Goldman Sachs

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We are an independent financial services firm helping individuals create retirement strategies using a variety of investment and insurance products to custom suit their needs and objectives. The content and examples shared are for informational purposes only and should not be construed as investment advice or serve as the sole basis for making financial decisions. Individuals are encouraged to consult with a qualified professional before making any decisions about their personal financial situation. Our firm is not permitted to offer legal advice. Investment Advisory Services offered through Elite Retirement Planning, LLC. Insurance Services offered through MRP Insurance, LLC.