Retirement Plan Update, Q4 2023
Market Recap:
Markets enjoyed a nice Santa Claus rally as stocks and bonds rose to end the year. Inflation continued to slow down, and markets have concluded that the Federal Reserve is done raising interest rates. Expectations now have rate cuts beginning as early as March 2024, and optimism for a future with lower interest rates served to drive prices up in both stocks and bonds. Markets are not factoring in a great deal of risk at this time, with bullish sentiment and valuations reflecting hope for a perfect scenario ahead. The path forward will depend on how the economy evolves, and we would not be surprised to see some volatility ahead, given the exuberance of investor sentiment and high stock valuations.
Fresh Year Fresh Priorities
Many of us approach the new year with resolutions to be physically healthier. That may include pledges to exercise more, eat better, or lose weight. Whether or not you’re planning enhancements to your physical health, we suggest it’s also a good time of year to get organized and look at your overall financial health. Proactive and purposeful management of your goals can often help you satisfy the dreams you may have to travel more, buy a house, spend more time with friends and family, or even learn a new skill.
Before you jump into the task of budgeting for the year, we suggest it’s important to step back and think about your priorities. Do you love where you live? How are you doing with your savings? Do you want to travel more? Do you want to make a bigger dent in your student loans? Priorities are personal and reflect what is most important to you. And it’s important to separate those priorities between “wants” and “needs.” For example, you want to take an international trip in the next one to three years, but you can’t find the money to save for that trip. At the same time, if you realize your monthly DoorDash costs would fund a nice savings toward that trip, then maybe you need to reassess your priorities. Likewise, if you find you’re spending a small fortune grabbing your morning coffee, but that IS a priority for you, then enjoy every cup!! The goal of setting priorities is not to suggest you can’t spend on anything you enjoy; it’s to help you prioritize what is most important and make sure you’re spending your money there.
Next steps:
Track what you spend. At least for a while. Bring consciousness to where your money is going. Does the spending match your priorities?
Set up your financial plan. We always argue that you should save for emergencies, pay off high-interest debt, save for retirement, and then consider saving for other mid-term priorities.
Build a spending plan that covers the basics and matches your priorities.
As always, if you have questions let us know. We’re here to support you in all of your retirement planning needs.