Maybe you haven’t heard the good news, but our economy is doing pretty well. In fact, we’re currently enjoying the third-longest stretch of market expansion in our history, and we’re only two years away from it becoming the longest stretch ever! On top of that, the unemployment rate is back down to what it was in 2007, before the Great Recession hit.
The stock market is performing well, too. The ratio of the S&P 500 is the second-highest it has been since World War 2.
Since we’re well into a long period of economic security, it would make sense to pause and evaluate your decisions regarding your Thrift Savings Plan. Are you taking advantage of market conditions to your best benefit? On the other hand, are you taking too much risk, because you’ve become perhaps a bit too confident?
Diversify. No matter how cautious or optimistic you’re feeling, your long-term investment goals should come first. Now is the time to reflect on your retirement goals, and make sure that your portfolio is diversified appropriately. Avoid aggressively chasing stocks that you’re only going to sell during a downturn. As Warren Buffett said, “Be fearful when others are greedy. Be greedy when others are fearful”.
How is your debt load? During times of relative prosperity, it can be easy to become over confident and take on too much debt. Remember that you probably want to retire without much debt, if any. Also remember that the situation can change at some point, and you don’t want to enter a less prosperous period saddled by debt you confidently took on during an upswing. Right now, while things are going well for most of us, is a good time to address debt and pay it down.
Establish an emergency fund. The federal government is set to hit its debt ceiling in October. We’re not too worried, but furloughs are always possible, and there have been some predictions that pay raises won’t be impressive in 2018. Who knows for sure what will happen, but setting aside a little emergency cash is always a good idea.
Even during relatively “good” times, we should always actively manage our financial lives. Schedule an appointment with us to check in on your TSP’s performance, and we’ll help you decide whether your decisions are currently in line with your long-term goals.