How This Trade War Could Ruin Your Retirement

First, the president declares tariffs on Chinese goods. Then, China
retaliates with tariffs of their own. Unless something changes, we
could be in for a huge trade war. This will have a definite impact
on business owners in America, especially farmers in the Mid-West
who export to China. But, did you know this trade war could also
devastate your retirement plans? 

If you're like me and watch the news regularly, you've seen a lot
about the recent tariffs the United States has placed on China
and the resulting fall out. These tariffs and the
reciprocal treatment from China will have a definite impact on
our economy, but probably not for the better. So why is this
happening?


Part of the reason the president has implemented these tariffs is
because of what he calls a "Trade deficit." This essential means
we send more money to China in exchange for their goods than they
send to us. We spend around $500 billion per year on Chinese
goods and China only spends $100 billion on our goods. That's a
big difference! But the affect of the tariffs could hurt
Americans much more than any trade deficit that may exist and the
reason is simple: it's wreaking havoc with our stock market.
Unpredictable Politics Brings Market Volatility

You probably know this already, but the market is fickle. It
doesn't follow rules or patterns. Instead, it's controlled by the
people who buy and sell into it, and one of the biggest influence
on how people buy and sell is the state of the economy. For the
last nine years, our economy, on a whole, has been excellent.
We're at the end of a nine year bull market and even with some of
the stress earlier this year, we haven't seen a significant drop
so far. **Imagine, though, how that may change as tariffs from
the US and from China affect businesses and the cost of goods we
already use. It doesn't look good does it? **
Even the threat of this trade war has been causing swings in
the market in the past week. You may not think that these tariffs
will have any affect on you, even if you are a business owner, but
the dramatic changes its causing definitely will! 

If you're young, single or newlywed, with no kids, and just
beginning to invest, market volatility isn't too bad. It can be
stressful but you know you have plenty of time to recover if
things turn south. These market swings we've seen recently allow
you to easily buy in at a low price, stay in, and later sell with
an excellent profit in little time.  


However, if you're close to retirement and you're heavily
invested, you are taking a huge risk. If the majority of
your retirement income is dependent on how the market is
performing, the trade war and resulting volatility could destroy
your plans for the future.  To put it simply: your risk
level is too aggressive.
Ignorance Is NOT Bliss: Know Your Risk

More than anything else you read today, remember this: The best
way to ruin your chance at retirement is not understanding your
level of risk. 


I have a perfect example of this through some new clients of
mine. They have saved admirably and are within only two or three
years of retirement. They’re definitely ready but didn’t have any
guaranteed income beyond social security. 


This isn’t an unusual position to be in anymore, as pension
aren’t as common. This is the norm for most of my clients
and it’s what I call a market-driven retirement plan. On the
surface, it’s a great plan too.
So what was the problem?  90% of their funds were in
equities.  This is a very aggressive investment plan. 

When I told them this, they didn’t understand. They said they’d
had great results in the last few years, so it couldn’t have been
too bad. But your risk level is NOT determined by how
well your portfolio has performed. Everyone’s portfolio
has done well in the last few years because we’ve had an amazing
market. 


Your risk level is determined by the percentage of your income
that’s dependent on the market. 
How Low Can You Go? Fix Your Risk Level To really illustrate to
this couple how much potential danger their retirement was in, we
created a few different future scenarios for them based on their
current plan. 

If everything went as they envisioned and the market continued to
grow, they were going to get a solid return for the next few
years. They’d be in a great position with plenty of money
available to them. 


However, if there was even one significant drop in the market,
like the potential drop we can expect is these tariffs go
through, it would devastate them. 


All the work they had done over their careers and the excellent
savings they’d contributed to would be completely ruined and so
would their retirement. 


When it comes down to it, they were too aggressively invested and
weren't thinking about the potential dangers of their
investments. **They were leaving themselves exposed and didn’t
even realize it! **


The good news is, caught this problem in time and could fix
it. 
The answer wasn’t that they shouldn't invest at all. Everyone
should. It’s just important to know what level of risk your
portfolio can handle. 

So, we discussed how much money they were willing to potentially
lose through their investments and decide on a level of risk they
were most comfortable with from there. **Now, they can continue
to invest with peace of mind for their retirement. **


Do you think you’re an aggressive investor? If your answer is no,
you’re probably wrong. Make sure you’re not needlessly exposing
yourself and ruining your chance at retirement due to political
forces outside of your control. Sign up for a free consultation
and we'll take a good look at your complete portfolio to help you
tangibly see your level of risk. We’ll make sure you have a plan
to expect market volatility without risking your future. 


Listen To Past PodcastsFind Out Your Risk Level