Squalls Out on the Gulf Stream

By Andy Ives, CFP®, AIF®
IRA Analyst
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As I write, Hurricane Dorian is pummeling the Bahamas, churning the ocean and producing catastrophic damage. Godspeed, Freeport. Forecasts suggest the storm will sweep north and brush the east coast of Florida, which is where I live. Hurricanes are nothing to trifle with. I have survived them before and know how to prepare. Should the storm bobble west and deliver its winds farther inland, we stand ready to evacuate. Some family members up the coast have already departed. In the interim, we will monitor the news, assess liabilities, implement strategies and act accordingly. That is our plan.

Fortunately, satellite images, science and the previous experience of storm experts all helps create a solid projection as to where the storm will head. Undoubtedly this information will save lives and minimize loss.

While I literally live in the cone of concern for Hurricane Dorian, we all figuratively live in a financial “cone of uncertainty.” What will the stock market do today? How do I prepare for retirement? What investment tools and resources are at my disposal? What is my plan? Admittedly, this is a thinly veiled comparison – preparing for an on-coming hurricane vs. retirement. Nevertheless, considering the juxtaposition of Dorian, my physical location and writing responsibilities, it feels appropriate.

Based on their expertise and life experiences, financial advisors can forecast a path for clients to follow. By leveraging preparedness tools like IRAs, Roth conversions, annuities, life insurance, certain investment strategies and the like, one can buffer themselves against the high winds of taxes and the storm surge of inflation. It is wise to check and re-check beneficiary forms. Make sure your flashlight has batteries. Understand the benefits and consequences of naming a trust as your IRA beneficiary. Familiarize yourself with the local evacuation zones.

Those who fail to prepare are the ones who typically need rescuing. Avoiding the retirement hurricane conversation does not make it go away. It is swirling on all of our doorsteps and will knock until it blows the windows in. Don’t be the person without a radio whose lawn chairs are summersaulting down the road like aluminum tumbleweed. An IRA prohibited transaction is an untethered boat. Excess contributions are unsecured trash cans. Missed RMDs are untrimmed branches raking against the house. Some of these items can be tied down, gathered up and fixed after the fact. Some are fatal errors, like doing more than one 60-day rollover in a year, or the owner of a beneficiary IRA trying to roll over his account.

Of course, not all financial dangers can be predicted, and some erupt unexpectedly with little warning. Rogue waves. Investment waterspouts. However, it is more practical and safer to get your home in order prior to impact. Consult with experts. Assess liabilities and deficiencies. Proactively implement strategies. Board up the windows if needed. Minimize loss. Prepare not only for the storms you see coming, but have shelter and shutters at the ready for the ones you don’t.

Squalls out on the gulf stream. Best of luck to all of us in the path.