How to be Prepared for Market Uncertainty in Retirement, Ep # 109

If you turn on the cable news there is only one thing you will hear about: the possible impeachment of President Donald Trump. This is not a political show. I don’t discuss politics on this show or in my practice. But we do need to discuss the impeachment possibility because you need to be prepared for any eventuality that will affect your retirement. That is why on this episode of Retirement Starts Today, I won’t be answering any listener questions or going over any retirement headlines. We’ll simply be looking at how impeachment or any market uncertainty may affect your retirement. 

The one thing that is certain about the markets is that they don’t like uncertainty. Share on X

Outline of This Episode

  • [1:22] The chances of the president getting impeached is pretty unlikely
  • [2:45] Often the best way to plan ahead is by looking back
  • [5:20] Uncertainty creates volatility in the markets
  • [8:22] Actionable steps you can take to prepare for market uncertainty 
  • [15:08] Take maximum advantage of the best part of your retirement savings

How likely is impeachment?

Since the Republicans are in control of the Senate there is very little likelihood that they will be able to reach the ⅔ majority vote that is needed to impeach the President. Unless of course, some kind of irrefutable evidence appears that a crime was committed. The only thing that watching the cable news networks will prepare you for is a heart attack. Their headlines will only serve to raise your blood pressure. 

The only thing that watching the cable news networks will prepare you for is a heart attack. Share on X

Looking at history can be the best way to plan ahead

Sometimes the best way to look forward is through the lens of history. The 2 relatively recent events that we have to look back on to compare today’s events are the Nixon resignation and the Clinton impeachment. Both made an impact on the stock market but in entirely different directions. The S&P was up about 40% in the years immediately following the Clinton impeachment. Conversely, the market went down 33% after Nixon left the office. These results had nothing to do with the presidents at the time. Listen in to find out why the markets took such different trajectories. 

Actionable steps you can take to prepare for market uncertainty

The one thing that is certain about the markets is that they don’t like uncertainty. Market uncertainty creates market volatility. So it is important to develop an investment strategy that works no matter who is in charge. Your retirement plan must work whether the markets are good, bad, or indifferent. Here is my advice for creating a retirement plan for any market.

Your #RetirementPlan must work whether the markets are good, bad, or indifferent. Share on X
  1. Don’t invest too aggressively. We are 10 years into a bull market. Since returns have been good for so long it’s easy to grow complacent with the amount of risk we are taking in our portfolios. Now is the time to reevaluate your risk tolerance and decide on the appropriate asset allocation for your retirement portfolio.
  2. Take the profits. If you own individual stock positions you can start by trimming your gains. Think about whether you should sell your positions and create a more diversified portfolio. 
  3. Draw a line in the sand. It is important to know when you need to reduce your income. You need to calculate your withdrawal rate and take note of when you need to reduce it. It doesn’t have to be a permanent change, but having that line in the sand will help to ensure that you won’t run out of money when times get tough. 
  4. Maximize your guaranteed options. Your Social Security income is one of the best parts of your retirement plan. You can make it even better by waiting until age 70 to maximize your benefit. 
  5. Remember that you are responsible for you. In the end, you are the only one responsible for your well-being in retirement. The president will not make a major change in your life or affect your retirement plans. The best thing you can do is to educate yourself or choose wise counsel to collaborate with. 

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