COVID-19, the so-called coronavirus which has sparked concerns of a global epidemic after spreading into multiple countries, has introduced additional volatility to the U.S. stock market as investors raise concerns over the effects the spread of the virus might have on the American economy.
For retirees, there are steps that can be taken to try and protect finances from the new market volatility, and one such tool seniors can employ is a reverse mortgage. This is according to Wade Pfau, professor of retirement income at the American College of Financial Services, as quoted in a new story published by CNBC.
“At some point it becomes too late to do anything after the fact,” Pfau tells CNBC.
Using stocks as a method to fund retirement is inadvisable in the current environment, Pfau says. Selling out declining-value stocks can lead to smaller stock footprints for investors, meaning they will make less money on that portion of their portfolio when the stock market does eventually bounce back, writes CNBC reporter Greg Iacurci based on Pfau’s input.
“Anything you can do to avoid selling assets for a loss will go a long way toward preserving your portfolio sustainability,” Pfau tells CNBC.
Turning to other assets less prone to volatility like cash or bonds is one such tactic that seniors can employ. One other tool that falls into that category is a reverse mortgage, Pfau says.
“They may also consider ‘buffer assets,’ which provide a steady stream of monthly income that don’t fluctuate with the stock market, such as a reverse mortgage,” Iacurci writes based on his interview with Pfau. “There are certain risks associated with reverse mortgages that retirees should gauge beforehand.”
Other interviewed specialists do believe that the shock to the market caused by the fear surrounding the coronavirus is temporary, but it’s difficult to tell how long market volatility will last.
“I think markets will go back up, but there’s no telling how long they will go down,” said David Blanchett, head of retirement research for Morningstar Investment Management to CNBC. “They could down for the next 10 years. No one knows.”
Delaying retirement and accumulating income for longer is a surefire way to avoid investment volatility, Blanchett says, describing that tactic as a “silver bullet.” However, those who are near retirement right now while this new strain of volatility has been introduced may also have to increase their current levels of saving if their portfolio has taken a hit recently, he adds.
Read the story at CNBC.