Creating Peace of Mind During Volatility
The markets feel relatively calm compared to early April, and it is easy to become complacent. However, it remains more likely than not that we will experience continued turbulence this year, which may cause ongoing concern. One key objective of wealth planning is to help provide peace of mind, and taking tangible steps offers reassurance.
A good starting point for those who have not yet established core protections is creating ballast within your finances. Setting aside at least one year’s annual expenses (including living costs, taxes, and liability payments) in cash or cash-like investments can offer stability in times of volatility. This cash buffer is valuable even for those currently earning income, as it may help ease concerns about a potential reduction in compensation or termination. For those who are no longer earning income and are relying on their portfolios, having at least one year of expenses in cash is essential; eighteen months’ worth is even better. A cash buffer reduces the need to draw from investments during market downturns and is particularly useful for those entering retirement.
After liquidity needs are addressed, another critical step is fortifying accounts pledged for loans with more than 45% leverage. Why? At 45% leverage, a 30% market decline, albeit drastic, would result in a loan-to-asset ratio of about 65% when the lender asks you to pay some of the loan. To avoid forced asset sales, reduce the leverage ratio. To proactively manage leverage today, pay down outstanding lines of credit, contribute additional assets, or strategically position less volatile investments within the pledged accounts.
Based on current conditions, a bumpy ride remains the likely scenario for the foreseeable future.
Social Security Concerns
Speaking of turbulence, concerns surrounding the future of Social Security have been growing. Recent staff reductions, administrative changes, and increased rhetoric about fraud have added to public unease. Although the President has vowed not to cut benefits, more Americans are choosing to claim benefits earlier than planned, and pending claims have risen sharply. While claiming the benefits early may seem tempting, it may result in significantly lower lifetime income. There are exceptions, like when a shorter life expectancy is anticipated, and the break-even point favors early claiming. These exceptions are specific to the individual, and we recommend discussing them further with your Wealth Manager.
In general, it is strongly recommended to avoid claiming Social Security benefits early. Despite the current noise and concerns, the political stakes surrounding Social Security are probably too high for it to be dismantled. Although projections indicate that the Social Security Trust Fund may be depleted by 2033, relatively modest tax code or benefits formula adjustments could extend the program’s solvency. It remains highly likely that Congress will act to preserve Social Security benefits.
That said, it is essential to know that administrative changes could cause payment delays. Delays, however, should not be mistaken for the disappearance of Social Security.
Please contact your Wealth Manager with questions about your wealth plan and Social Security.
Weekly Commentary
Wealth Planning Commentary – April 28, 2025
Mallon FitzPatrick
Creating Peace of Mind During Volatility
The markets feel relatively calm compared to early April, and it is easy to become complacent. However, it remains more likely than not that we will experience continued turbulence this year, which may cause ongoing concern. One key objective of wealth planning is to help provide peace of mind, and taking tangible steps offers reassurance.
A good starting point for those who have not yet established core protections is creating ballast within your finances. Setting aside at least one year’s annual expenses (including living costs, taxes, and liability payments) in cash or cash-like investments can offer stability in times of volatility. This cash buffer is valuable even for those currently earning income, as it may help ease concerns about a potential reduction in compensation or termination. For those who are no longer earning income and are relying on their portfolios, having at least one year of expenses in cash is essential; eighteen months’ worth is even better. A cash buffer reduces the need to draw from investments during market downturns and is particularly useful for those entering retirement.
After liquidity needs are addressed, another critical step is fortifying accounts pledged for loans with more than 45% leverage. Why? At 45% leverage, a 30% market decline, albeit drastic, would result in a loan-to-asset ratio of about 65% when the lender asks you to pay some of the loan. To avoid forced asset sales, reduce the leverage ratio. To proactively manage leverage today, pay down outstanding lines of credit, contribute additional assets, or strategically position less volatile investments within the pledged accounts.
Based on current conditions, a bumpy ride remains the likely scenario for the foreseeable future.
Social Security Concerns
Speaking of turbulence, concerns surrounding the future of Social Security have been growing. Recent staff reductions, administrative changes, and increased rhetoric about fraud have added to public unease. Although the President has vowed not to cut benefits, more Americans are choosing to claim benefits earlier than planned, and pending claims have risen sharply. While claiming the benefits early may seem tempting, it may result in significantly lower lifetime income. There are exceptions, like when a shorter life expectancy is anticipated, and the break-even point favors early claiming. These exceptions are specific to the individual, and we recommend discussing them further with your Wealth Manager.
In general, it is strongly recommended to avoid claiming Social Security benefits early. Despite the current noise and concerns, the political stakes surrounding Social Security are probably too high for it to be dismantled. Although projections indicate that the Social Security Trust Fund may be depleted by 2033, relatively modest tax code or benefits formula adjustments could extend the program’s solvency. It remains highly likely that Congress will act to preserve Social Security benefits.
That said, it is essential to know that administrative changes could cause payment delays. Delays, however, should not be mistaken for the disappearance of Social Security.
Please contact your Wealth Manager with questions about your wealth plan and Social Security.
Disclosure and Source
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