Saying that 2020 was an abnormal year is probably the understatement of the century. At the beginning of the year, who could have foretold that we would experience societal lockdowns, a Depression-like job market, and a complete upending of our entire way of life? And who could have foretold that those changes would continue into 2021?
While we all long for a return to normal, in the meantime we just have to keep on plugging along as best we can. Those who still have jobs have to think about paying bills, buying food, and saving for retirement. And with the investment landscape in 2020 also having had its major ups and downs, who knows what’s in store for 2021?
At the end of every year, many people make resolutions for the coming year, vowing to make changes. Some people stick to them, some people don’t. But here are five New Year’s resolutions for investors to get them thinking about their portfolios and how to protect them.
1. Stay on Top of Retirement Plan Changes
If you’re saving money, there’s a good change that the bulk of it is going towards retirement savings. And with recent legislative changes, the retirement planning landscape looks a lot different today than it did a couple of years ago.
For one thing, the “stretch IRA” has now been done away with. That mostly affects those who expect to inherit an IRA from someone such as a parent. But for those who may have thought about leaving a retirement account to heirs, that could lead to some rethinking. Some have speculated that this change could result in more Roth IRA conversions, and fewer traditional IRAs.
Other changes that have occurred recently include raising the age for required minimum distributions (RMDs) to 72, from the previous 70 ½. And there’s a move afoot in Congress to possibly raise the RMD age even further, or even to get rid of it altogether.
That’s part and parcel of Congress’ response to COVID and the financial burden that has placed on many American households. Since retirement accounts often make up a significant portion of investors’ assets, anything that can keep them from having to draw down their funds unnecessarily is helpful. It’s highly likely that 2021 could feature changes to retirement accounts that could affect your decisions on retirement planning, so make sure you pay attention to what Congress is doing.
2. Rethink Your Portfolio Allocation
If you’re the kind of investor who sticks to the buy and hold strategy, the beginning of each year could be a good time to rethink your investment aims and portfolio allocation. You don’t want to just ignore your investments completely, you should aim to check them at least once a year to assess your performance and ensure that your investments are doing what you want them to.
If your retirement accounts are currently heavily weighted towards stock markets, you may have seen some crazy performance this year. Even though markets are up only slightly on the year, if you happened to buy in after markets tanked in spring, you may have seen some of your investments make some pretty significant gains. But can you sustain those gains in 2021?
Now is the time to think about what the year ahead will bring for the economy and how that will affect stock markets. And if it’s time to think about portfolio reallocation, what better time to do that than at the beginning of a new year?
3. Think About Portfolio Diversification
This is also the time to start thinking about portfolio diversification. Hopefully your retirement savings are already well diversified and invested in a mix of assets. But if you’re heavily concentrated in stocks, or invested only in stocks and bonds, now is the time to start thinking about diversifying into other assets, such as gold and silver.
If you’re already invested in precious metals, now is also a good time to think about diversification. Maybe you have thousands of dollars invested in a gold IRA, but have you thought about investing in silver too? Gold is doing well this year, up 24% on the year, but silver has had nearly double the gains, up 47% this year. Maybe it’s worth taking another look at your precious metals holdings and making some adjustments.
4. Get Your Papers in Order
This one had to be thrown in toward the end because most investors will find it boring. Who wants to go through reams of paperwork to make sure that everything is working as it’s supposed to? After all, if you haven’t made any changes to your accounts over the years, you shouldn’t have anything to worry about right?
Well, ideally that’s the case, but you can’t ever be too certain. If you haven’t looked at the fine print of your financial accounts in a long time, now’s the time to make sure that everything is in shape, that your beneficiaries are correct, and that contact information and account details are up to date. You may also want to start thinking about a will if you don’t have one already, and about updating your will if you have one and it’s been a while.
5. Prepare for the Unexpected
2020 threw most people for a loop, and could definitely claim the title of “Most Unexpected Year Ever.” But could 2021 or future years be even worse? Never say never.
If you managed to make it to the end of 2020 relatively unscathed, whether physically, emotionally, or financially, good for you. But now you’ll want to make sure that you’re ready for anything that comes next, even something that could be worse than COVID.
Could you handle the cost of a hospitalization, whether it’s for COVID, cancer, or a car accident? If you lost your home to fire, flood, or other natural disaster, how would that affect you financially? How about if your car was totaled and you had to buy a new one?
And most importantly, how would you fare in the event of a financial crisis as severe as the Great Depression? We already saw a precursor of it this past spring, when the economy contracted 35% in a matter of weeks, while stock markets collapsed. Could your retirement savings withstand losses even more severe than that?
To make absolutely sure that your wealth is protected, maybe it’s time to start thinking about an investment in gold or silver. The two precious metals have helped millions of people over the centuries protect their wealth against financial turmoil and economic uncertainty. In 2021, think about letting them do the same thing for you.