Photo of Ray Ferrara CFP Ray Ferrara CFP Oct 30, 2020

The value of the U.S. dollar is taking a dive.

That is not the most comforting sentence for an American to read, but it is important to acknowledge the fact and build contingency plans for the various outcomes. Now, we do not want to scare anyone. The strength of the dollar constantly ebbs and flows depending on what is going on in the U.S. economy and what is going on in the global economy. But the dollar dive can have some outcomes that may affect your retirement planning.

A good retirement plan needs to be flexible enough to deal with the peaks and valleys of the economy and the U.S. dollar. Take a look at what you need to know about the dollar dive to understand the bigger picture of why you need a flexible retirement plan.

How the dollar dive can affect retirement financial planning

There is a direct relationship between the cost of goods and the value of the dollar. For example, when prices for food or gas rise, the U.S. dollar’s value decreases. The value of the dollar today is much less than it was in the past due to inflation.

When the dollar value decreases, cost of living becomes more expensive, and it can affect the market health. The U.S. may be the wealthiest nation in the world, but it also has a large national debt. This can impact foreign investors and drive them to move out of dollar-based investments. As foreign investors slowly move out of U.S. investments, the market may experience some negative effects.

What to do when the dollar is diving

A negative impact on the U.S. markets from a dollar dive can be concerning for retirees and pre-retirees because many people have retirement savings in U.S. markets. 

So, what do you do?

First of all, do not panic. When the dollar loses value, the last thing you want to do is panic-sell and lose on your investments. The dollar can grow again, and other economic factors can keep your investments healthy and growing. 

Second, make sure you have a well-diversified portfolio. Do not put all your hopes on single stocks. Invest in mutual funds, ETFs, bonds and other investment avenues. A well-rounded portfolio tends to stay strong and last through periods of economic uncertainty, such as a dollar dive.

Talk to a ProVise CFP® professional about managing your retirement plan

Managing your retirement plan on your own is like trying to orienteer when you do not know how to use a map or compass. You can end up lost and stranded, or when it comes to your finances, you can lose on your investments.

At ProVise Management Group, our CERTIFIED FINANCIAL PLANNER™ professionals can act as your guide in the wilderness to help you navigate the financial landscape. We can get to know you and your current financial circumstances, goals, risk tolerance and personal values to help you develop a plan that works for you. We can also create a written plan for you at a fiduciary standard of care. All our written plans come with an unconditional money-back guarantee. If you are unhappy with your written plan, you can return it to us, and we will refund 100% of the fee paid.

Are you ready to talk to a professional about managing your retirement plan? Contact ProVise today to schedule a complimentary consultation.