I have not yet written about the downturn in the stock market. This has been intentional; partly, I did not want to add to the panic, and partly (mostly), I didn’t have anything helpful to say about it. I don’t have advise to offer and frankly I’m a bit skeptical of anybody’s advise these days. I read, watch, and listen to quite of few market analysts and experts and have seen clearly how even amongst themselves they disagree and suggest a full spectrum of varying advice. Everything from sell your assets, to hold your assets, to trade the daily volatility. The bottom line? Nobody knows.
From a personal standpoint, the timing of this market downturn could have probably been a little better. I retired at the end of September 2007, and basically the market has been on a downward trajectory from that time. Sure, I have a reasonably well balanced portfolio, but like anyone who has anything in stocks, I’ve taken a big and painful hit. But, like Retired Syd said so well, I seriously doubt I would have gone through with my retirement if this had happened before I left full-time employment. As long as this had to happen, it’s just as well it happened after I retired since now I just have to make it work. I have no intention of returning to the workforce.
I have been trying to find the silver lining in all this and I read an article today that uncovered at least one good idea for me. This is an excellent strategy for anyone who has an IRA and has been thinking of converting to a Roth IRA.
I’ll admit that I’ve been kind of bummed when I think about what an opportunity the current market presents for anyone who is in “saving and investing” mode, and that I can’t really take advantage of this. However, this article reminded me that there is still something I can do - I can convert some or all of my IRA funds to a Roth IRA. Yes, I’ll incur some tax liability this year, but it won’t be so bad since, without a fulltime income, I’m now in a much lower tax bracket. And as the article points out, when and if the market recovers and the equities in that account hopefully recover, the money earned in the Roth IRA will never be taxed. How beautiful is that?
In the end all any of us can do is try to make the best of the situation. We may all be at different points in our lives, but if we look for it, we may each be able to find something positive. For young investors, this would be a wonderful opportunity to start or continue investing in a retirement account, possibly picking up some quality stocks or funds at bargain-basement prices. For anyone looking to purchase their first home, they may be able to find something they could not have afforded a couple of years ago. For those of us who are past our earning peaks and looking to our investments to fund our futures, strategies such as converting an IRA to a Roth IRA can help ease the pain. For anyone who has enjoyed short-term stock trading in the past, the current market volatility may be a once-in-a-lifetime opportunity.
I’m sure there are more opportunities to make lemonade out of the basket of lemons our economy has turned into. Are there other strategies you are considering? What have you done to try to make the best of the current downturn in the stock market and housing market?
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Tags: assets, money management, saving
November 25th, 2008 at 1:10 pm
That’s my plan. I recently quit early and am planning to convert the maximum possible at the 15% tax rate each year. I contributed to my 401(k) at the 25% and 28% tax rates so it’s a great tax savings in the long run.
Fortunately, I had 95% of my assets out of stocks with the downturn and haven’t been badly affected. Hopefully, it will work out in my favor in the long term. After all, we should all hope for chances to buy at lower levels prior to retiring rather than just buying at ever increasing prices. It’s hard to stomach while it is happening though.
Retiredat40´s last blog post..The Take Your Lunch to Work Saving & Retirement Plan
May 29th, 2009 at 6:25 pm
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