Thrill rides are a staple for amusement/theme parks. Fifty years ago, amusement parks were fewer in number, but they were all rated by the thrill rides on site. The bigger the dips and the faster the speed of the giant wooden roller coaster, the greater the momentum and suddenness of jerking motion of the Scrambler resulted in greater fame and attendance for the park.

Unfortunately for those retired and nearing retirement, increased market volatility during 2019 introduced the uncertainty and insecurity of the first coaster hill to watching the family nest egg. The arrival of the Black Swan that is the COVID-19 virus, has made everyone looking at their retirement savings feel like they are on the fastest, steepest, most twisting wing coaster in the world. Thrill rides have no place outside the amusement park!

According to a survey by the CFP Board of Standards  (reported here https://bit.ly/2VQVRkP), the top financial concerns for clients were managing volatility, protecting assets, unemployment & reduced income. The most common advice planners offer is, “Sit tight. Wait to make any major financial decisions until volatility decreases.”

This advice sounds simple to someone with extensive financial markets experience. It is more difficult for someone whose life’s work has been devoted to ministry, missions, education, or faith based nonprofit service. When your income has been modest, it is difficult to “sit tight” as equity markets drop more than 30%, banks are paying almost no interest, and 26.5 million people have lost their jobs in 5 weeks.

The Christian Churches Pension Plan is well positioned to provide perspective on the recently hyper-volatile financial markets. We are a plan that has survived 8 Bear Markets and specifically serves those in ministry. Our staff has both ministry and financial services experience. The people managing the plan assets are among the largest and most respected in the world. These are four broad principles that may help in a stressful time.

  • Don’t panic on news reports! The price of oil on April 20, and the reporting surrounding it, was enough to cause confusion if not total panic. News reports were rampant that oil producers were actually paying people to take the oil. In reality, the price of West Texas Intermediate crude on Tuesday settled at $11.57 (https://cnb.cx/2VU37fQ). The negative price was for May futures commodity. Is the price of oil low? Yes. Will oil prices remain under pressure? Yes, but the voices of panic were probably more shrill than necessary. Panic decisions are wrong far more often than they are correct.
  • Don’t cash out your retirement account! The CARES Act included provisions making it easier and penalty free to cash out of a 403(b) and 401(k). Should you grab it to pay bills? Problems for cashing out still remain. First, if you do so, income taxes will be owed on all funds deposited into the account upon which taxes were deferred, even if you cash out less than you invested. Cashing out will also eliminate any chance for recovery or gain from these funds in the future. Withdrawals from Roth accounts are preferable if absolutely necessary.
  • Diversify and rebalance your portfolio. Everyone needs to know their own personal risk tolerance. There will always be someone who may tell stories of “making a fortune” on an investment that is riskier than fits our nature. Be well diversified. Do not choose one mutual fund, but spread assets among strategies and classes. Never think the retirement account is a “set it and forget it” entity. Annually rebalance your account. This may not provide an exciting story, but it allows you to sleep well at night.
  • As you grow nearer to retirement, build a healthy cash balance. When you are 40 years from retirement, you will want as much money invested as your personal risk tolerance allows. When reaching your forties, begin gradually building a good cash balance. This will cushion market volatility and personal emergencies. By the time you are nearing retirement, having 25% in cash is a good strategy. Such a balance will help prevent the need to sell when investments are down in order to provide income.

Remember two points. Thrill rides belong in an amusement park, not in your retirement account. The amount of income your retirement savings can provide is of more importance than a particular total value on any given day.

Here is to living financially free and pursuing your passions!