By Submitted Article on May 23, 2020.
Dear Money Lady,
Just read your article “Give the Market Time.” The major issue for us being seniors is time and how much we have left. It was not an issue 12 years ago during the last stock-market crash but we are now in our 70s and it is now a major issue. Do you have any different advice for seniors with no time to wait for a recovery? – Victor
There’s no denying that we would have never anticipated the duration and the depth of pain that we have seen in the market and at this point I think seeing another drop of 10-20 per cent is not out of the question. For seniors, nervously watching a decline in their retirement savings, I know this is not what you want to hear. But there is hope since a long arduous recovery, I believe, is not in the cards.
Many economists anticipate that another bull market is just around the corner and the decline in your portfolio will not be long lasting. This crisis is not like any other we have witnessed in the past and I would caution new investors against using traditional stock market measures to try and time a market entry. When we first experienced the effects of the coronavirus on the stock market, together with the oil crisis, we witnessed an explosive downturn that was unprecedented and, in some respects, unexplainable. We all know that the market is very aggressively reacting one way or the other, but most economists believe we will see it go up just as fast as it declined when the market turns.
The recovery will need to go through a few clearly defined stages. Initially we should see a defensive market reaction to change for approximately four to six months followed by a market recovery of 40 per cent to 50 per cent that will take 12 to 18 months. Only after this stage will we begin to see the beginning of our next bull market that is predicted to last three to five years. There is no doubt that we will see the market reach higher highs than we ever anticipated a few months ago when the market was calm and just ticking along before the coronavirus pandemic.
I know it is devastating to see your retirement savings take a hit right now and the thought of “just waiting it out” is agonizing. However, this is indeed what we must all do now. There are a few government benefits that you can take advantage of if you are feeling the “financial pinch.” The Canadian Emergency Response Benefit provides up to $900 bi-weekly for up to 15 weeks and the Goods and Services Tax credit (GSTC) coming out this month will also provide some relief with $400 for single individuals and $600 for couples. The government has also reduced the minimum withdrawals from Registered Retirement Income Funds (RRIFs) by 25 per cent for 2020 and will also allow all taxpayers to defer any personal taxes owing without interest or penalties until Aug. 31, 2020.
Unfortunately, “you only know what you know,” as they say, and “you can only control what you can control.” The impact of this virus will be what it is, and we will come through it. If history has shown us anything, it is that this crisis, like all others, will pass and we will come out of it stronger and more resilient than before.
Good luck and best wishes,
Written by Christine Ibbotson, author of the best-selling book “How to Retire Debt Free & Wealthy” and a new book “Don’t Panic – How to Manage your Finances and Financial Anxieties During and After the Coronavirus,” available at all bookstores across Canada. If you have a money question, please email on website: http://www.askthemoneylady.ca.