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Investing Through Life Transitions

Most investors are focused on changes in the market, but what about the other changes that life brings?

Your investments should also keep up with changes in your life, and this can be challenging, in part because some life changes are so gradual that you may not be fully aware of them.

We recently spoke with an investor who’d been an avid hiker and mountain climber for most of his life. Even at 75, he still thought of himself as a mountaineer, even though, it had been years since he’d been on a summit.

When he went back to the mountains recently, however, he found that he couldn’t go as far as he’d expected. He had always been someone who pushed to go farther, but this time, he had to turn back early.

You change over time. Your investments should, too.

Many retirees in their 70s or 80s still feel like they’re in their 50s or 60s, and so they invest the same way they did back then. They are used to investing in stock funds, and they figure they understand the risks because they’ve been through down markets before. However, retirees are often more vulnerable in down markets because they don’t have as much time to recover from losses. They also don’t have a steady paycheck to cover their expenses if their investments take a big hit. Taking too much risk can turn out to be a big problem down the road.

What to Do When Life Changes Quickly

Sudden life changes can be equally challenging. We talked to an investor whose wife had been diagnosed with a serious, life-threatening illness. As you might expect, this had turned his world upside down. He was busy with doctor appointments and treatment plans, and he was still trying to wrap his head around how this turn of events would change their lives.

In times of crisis, your investments may feel like your last priority, yet these moments can be an important time to reassess your goals and your risk needs. This particular investor, for instance, may need to change his allocation in case he needs to tap into his investments sooner than he’d planned in order to cover the costs of additional medical care and support.

He also should review the beneficiaries on his and his wife’s accounts and make sure they’re up-to-date. And they may consider whether he should have durable power of attorney (DPOA) on his wife’s accounts so he can make any necessary changes if she is disabled.

A Partner Through Life Transitions

You don’t have to do this on your own. One of the advantages of working with a financial advisor is that you have someone you can talk through these changes with, and your advisor can implement any changes to your investments for you, so you can be there for your family. 

An advisor can also help you recognize some of the life changes that occur more gradually. While you may feel like you’re the same person you were 20 years ago, your advisor is there to make sure your investments continue to keep up with your current circumstances.

When we send our quarterly reports to our clients, we always remind them to consider if there have been any changes in their lives that might affect our investment plans.

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