The Coronavirus Pandemic and Your Financial Plan

Jimmy Lee |

As I write this blog post from home while “social distancing,” the world is in the throes of the coronavirus COVID-19 pandemic. Stock markets are crashing. Well-laid-out plans years in the making are changing (my own wedding date scheduled for May 22nd is looking increasingly doubtful). Well-laid-out financial plans may also be impacted. With many retirement account balances decreasing on an almost daily basis, are you still on track towards meeting your goals? Here are some steps to take with your advisor to delve into this question.


Look at the big picture. This includes current income and guaranteed income sources such as social security and pensions, current and future spending, savings rates, taxes, inheritances, expected inflation rates and assets. Additionally, include a reasonable rate of return for your investment portfolio allocation (more on that below). When all is said and done, determine your probability of success. In short, analyze the possibility that your income and assets will last through retirement.


Ensure that your asset allocation is still in line with your goals, time horizon and risk tolerance. If many years from retirement and heavily weighted towards stocks, changes may not be necessary. If close to or in retirement, a portfolio heavily tilted towards stocks may not be appropriate. Additionally, weigh risk capacity (ability to take risk) with risk tolerance (willingness to take risk). After an 11-year bull market run, some investors may have understandably overstated their risk tolerance. Importantly, utilize a historically reasonable rate of return for your portfolio allocation when assessing goals such as retirement. For example, if a portfolio consists of 25% stocks, an 8% long-term rate of return is not suitable. However, this may be more reasonable for a portfolio composed of 80-90% stocks.


As a typical recommendation, hold three to six months of living expenses in cash or cash equivalents for your emergency fund. When an emergency need arises, maintaining an appropriate level of cash reserves may allow you to avoid tapping resources such as credit cards or long-term retirement savings, which could negatively impact your financial goals. Do not fret if you discover that your emergency fund comes up a bit short. When possible, consider working on building your emergency fund as a high priority item so that you are prepared in your time of need.


Evaluating a financial plan also includes risk management. Review life insurance coverage to determine if your family could maintain their standard of living if you were to pass away. While still working, assess disability insurance coverage to ensure that your family would not be significantly impacted should you become disabled. A general rule of thumb is to maintain enough disability insurance coverage to replace at least 60% of income. Dust off property and casualty insurance policies and contact your agent to confirm that coverage is appropriate. If you do not have umbrella (excess liability) insurance, determine if coverage should be obtained. Finally, assess the impact that a long-term care event could have on your financial goals.

Ultimately, a key consideration of any plan is the wellbeing of you and your family, and we hope that you stay safe and healthy during this challenging time. We are all in this together and no doubt we will come out stronger than ever when this crisis has been resolved.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. We suggest that you discuss your specific situation with your financial advisor prior to investing.

Investing in stock includes numerous specific risks including: the fluctuation of dividend, loss of principal and potential illiquidity of the investment in a falling market.

The hypothetical rates of return referenced are not representative of any specific situation and do not reflect the deduction of fees and charges inherent to investing.

This article is intended to assist in educating you about insurance generally and not to provide personal service. If you need more information or would like personal advice you should consult an insurance professional.

Asset allocation does not ensure a profit or protect against a loss.

Investing involves risk including loss of principal.