Riding the Whirlwind – 2022 in Review

By Mitchell J. Smilowitz, CPA

What a year 2022 was for long-term investors! The global economy was battered by persistent inflation, the war in Ukraine and continuing COVID supply disruptions. The S&P 500, a measure of large-cap U.S. companies, declined 18%. The Nasdaq, a measure of the U.S. technology sector and small- and mid-cap companies, lost nearly a third of its value. Rising interest rates led to declines in the bond market, taking away this refuge from declines in equity markets. These were the largest decreases in stocks and bonds in decades.

I am comforted that most JRB participants maintained their long-term perspective, continued contributing to their retirement accounts and found comfort in the mantra: “I have lost nothing in the stock market because I am not selling today.” Based on historic experience, the economy and investment markets should rebound.

Nonetheless, 2022 has changed the way many people think about retirement.

  • According to Northwestern Mutual’s 2022 Planning & Progress Study, Americans expect to work longer before retiring.
  • Americans also expect to need to save more to achieve their retirement goals. In the Northwestern Mutual survey, respondents estimated they would need $1.25 million for a comfortable retirement.
  • Why do Americans plan to work longer and need to save more? In addition to saving for retirement, Americans say they have concerns about inflation, especially rising medical costs and paying for other financial responsibilities such as saving for a down payment on a house and paying off student debt. They are also concerned about the future of Social Security.

The good news is that Americans are saving more. Data from the Plan Council of America show that, in 2021, combined worker and employer retirement plan contributions equaled 13.9% of pay, a record high.

Along with these changing perspectives on retirement, many Americans are experiencing higher levels of financial stress. About 43% of respondents to the Northwestern Mutual survey do not expect to be financially ready for retirement when the time arises.

What can you do to prepare? Experts agree that financial planning is the best first step. Planning allows you to take control of your finances. This increases your discipline, improves your ability to manage debt and reduces anxiety making it easier to sleep at night. Over 60% of Northwestern Mutual respondents said their financial planning needs improvement, but only 35% have sought the help of a financial professional. On the other hand, respondents working with a professional feel much more confident that they can retire comfortably.

Here's where the JRB can help. We offer a Complimentary Financial Consultation during which we will evaluate your progress toward retirement security and develop projections based on different assumptions regarding asset allocation, saving more and/or working longer. For those closer to retirement, we will work with you to create a distribution strategy that minimizes your tax liabilities while maximizing investment income. To learn more, see our article on the JRB’s Complimentary Financial Consultation.

Last year’s financial volatility affected all of our retirement portfolios. It upended many of our assumptions about when to retire, the income we can expect to receive from our savings and what we need to accumulate to achieve financial security. To see how your portfolio weathered the storm, contact the JRB or call 888-JRB-FREE (572-3733) to set up a complimentary financial consultation.

January 2023