Independence Day

Tomorrow is July 4, Independence Day in the United States. We are a country that was created by human beings and is governed by human beings and we are therefore by definition imperfect. Our imperfections play out every day on our screens. Yet that we can watch and participate in protests is evidence of the freedoms that we have. So, despite our country’s imperfections and despite the apparent rancor among our citizens, on this Independence Day, we must appreciate our freedoms. Without our freedoms, we would not have the economy that we have, we would not have the investment opportunities that we have, we would not the wealth that we have, unequally distributed or not.

Financial Independence Day

Our country earned its political independence 244 years ago. What year will you earn your own financial independence? Perhaps you already have, and congratulations to you if you have. Perhaps “independence” was forced upon you in the form of a layoff or furlough, and we pray for you if such is the case. Maybe you are working from home and thinking about how much you like your own home and wishing that you could work from home permanently, with or without the work part. Now is a good a time as any to plan to make Financial Independence an important goal for you, perhaps your most important goal. Such plans are best completed by working with a financial professional, especially a Certified Financial Planner® such as myself. Please contact me if you are committed to become Financially Independent. I bet you are closer to that goal than you think.

IMO

I am tying America’s Independence Day to Financial Independence, and rightly so. We can achieve Financial Independence here in the USA because of the freedoms that those before us fought for and did their best to protect. Now it is up to you to take the next step and work to write your own Declaration of Financial Independence.

Doom May Be Doomed

Doomsayers have a tough go of it, especially those who predict widespread bankruptcies.  After the 2008 Financial Crisis, investment banker and hedge fund manager Meredith Whitney gained renown by predicting that a number of public entities – cities and counties especially – would go insolvent and be forced to declare bankruptcy.  Ms. Whitney’s prediction turned out to be wrong:  though many municipalities continue to struggle, only a few went the BK route.  Kudos to her for going out on the limb for this prediction and making more people realize the extent of financial difficulties that municipalities face, but other forces – especially historically low interest rates – helped to stem the bankruptcy tide.

COVID Corporate Doom

Nowadays, the doomsayer vultures are circling corporations, especially those whose businesses have been negatively affected by the COVID shutdown.  The prospects for companies like Macy’s, Carnival Cruise Lines, American and United Airlines, AMC Entertainment, and SeaWorld were not good.  All had their businesses substantially eliminated for a period of time by the COVID shutdown.  How could they all possibly survive?  Well, they all have survived, at least so far.  The same force that helped to save the struggling municipalities – low interest rates – are helping to keep struggling companies afloat.  The Paycheck Protection Plan and corporate bond purchases by the Federal Reserve have also played a part, but these efforts were underpinned by the debt markets. 

Difficult to Make Doom Happen

Widespread bankruptcy predictions don’t often come true because free market forces adapt to accommodate the tough economic situation.  Well-capitalized companies have investors who are motivated to protect their investments to keep creditors at bay.  Less well-capitalized companies have flush private equity investors to turn to if they need an equity infusion.  All of this is possible because of low interest rates.  With rates as low as they are, the required rate of return for equity is also lower than it otherwise would be, and so equity opportunities that may not look as promising during “normal” times may look a little better now during an unusual time.  The government intervention aspects are nice but the real helper is the low interest rate environment and the bond investors who are ok with low returns.

IMO

We are certainly not out of the COVID woods yet.  Chesapeake Energy just declared BK, as did Cirque de Soleil.  These followed Hertz, Neiman Marcus, and others.  Private equity doesn’t have a large appetite for the restaurant business and so many of your favorite local restaurants remain on life support.  However, we could emerge from this economic crisis relatively intact, with a few exceptions, and that would exceed early projections. 

COVID Economic Statistics

Some economic statistics that the government reports every month look odd due to the COVID economic shutdown and what resulted from it. Don’t get too excited about any good news, other than to make sure that the trend is in the right direction.

Nonfarm Payrolls

After all of this time, the Bureau of Labor divides workers into two piles: Farm and Non-Farm. Seems like they should expand the categories a little more as we move away from an agrarian society. Regardless of that, non-farm payrolls added 2.5 million jobs in May. Sounds great, but it represented only 11% of the 22.1 jobs lost in the previous two months, meaning that 89% of the people who lost jobs were still out of work as of June 1. The stock market may have substantially recovered, but the job market still has a long way to go.

Savings Rate

What do you do with your money when restaurants, bars, theaters, most stores, sports, and Vegas are all closed? Save it – and hopefully you were able to boost your own savings. The savings rate was 33% in April, which was the highest figure ever since the Bureau of Economic Analysis started reporting it in 1959. For those who think people spend too much and save too little, April should have been the realization of their dreams! Yet, here we are in a recession. Savings is good for people, but when the economy is stalled and banks aren’t lending, then an increased savings rate doesn’t boost the economy as much as it might with a full throttle economy. Again, don’t get too excited now about a higher savings rate.

Personal Income

Personal income jumped 10.5% in April – the May personal income report is expected this Friday. This would ordinarily be incredible news, but the April rise was substantially due to government transfer payments: PPP loans, enhanced unemployment payments, and the like. The April jump was not due to increased private sector economic activity. Again, don’t get too excited, even if the May report when it comes out on Friday is a good number.

IMO

In order to try to help people and businesses, the US government borrowed Trillions of dollars in order to print more money during the COVID outbreak. This policy caused several economic statistics to look wacky. I recommend you keep perspective in mind as you digest these statistics. I believe the recovery will take several years, meaning it will be several years before US GDP will get back to where it was pre-COVID and the unemployment rate will dip to the mid-single digits. Aging demographics don’t help as younger people are typically quicker to adapt. COVID really whacked us and we will be reeling for a long time.

A Different Way To Earn Current Yield

Last time I wrote that I expect interest rates to remain low for years to come in part because that will help with the national debt. I also wrote that people who save and people who look for a current return on their investment portfolio will be hurt by low interest rates. If these savers want to look for alternatives to traditional fixed income investments that offer Total Return – current income plus the potential for capital growth – then savers may want to consider my Covered Call strategy.

Covered Calls

Covered calls are considered to be a conservative way to create current income from a long portfolio. Covered call selling or “writing” involves several steps:

  • The investor is long the stock or stock index in question.
  • The investor chooses call options that equate to the number of shares (or fewer) that they own in the underlying stock or index.
  • The strike prices of call options are typically at or higher than the price that the stock is currently trading at.
  • The exercise dates of the options are anywhere from a week to several months out. I like a short time frame, but others may like longer. 1 to 4 weeks is typical.
  • The investor sells or “writes” the call options and collects the premium for selling the call options.
  • At exercise date, if the underlying stock or index is trading below the strike price of the option, then the option expires worthless and the investor keeps the premium.
  • If the underlying stock or index is trading above the strike price at exercise date, then the call option owner will “call” the stock away from the investor at the strike price of the option. The investor still keeps the option premium they collected when they sold the call option.

Upside/Downside

The upside of this type of transaction, known as covered call writing, is that the call option gets to keep the option premium no matter what happens next to the stock price. The downside is that the investor may be foregoing some of the “upside” of the stock. For example, if the strike price of the option is $40 and the stock is trading at $43 at exercise date, then the investor will have to “put” the stock to the call owner at $40 and will lose the $3 of upside. However, they have already collected the call option premium to soften the blow. Another downside is that the investor must maintain their long position as long as they are currently short the option – otherwise the investor would be “naked”, which is not a good thing.

Index Funds

My strategy involves writing call options on index funds that I already own. I like to write call options every week that expire a week hence, because I feel like I have a better idea of what may happen a week out than what may happen a month out. I choose strike prices that are higher than the current price of the index fund because it allows me to participate in at least some upside in the index fund. If the price of the index fund trades up above the strike price of the option and my fund gets called away from me: Oh, well, at least I didn’t sell at a loss, and I kept my option premium.

Results

Over the past 18 months, I have been able to generate a current yield in the high 6%-range, by my own calculation. I have had my long positions called away from me a few times but mostly not, so I have been able to participate in most of +the gains (and losses!) of the index funds that I own, which are mainly the S&P 500 and Nasdaq 100 indexes. Even during the horrible loss periods earlier this year – March in particular – at least I kept my option premiums. As always, past results are not indicative of future performance, but I believe this is a sustainable strategy that can be tweaked on a weekly basis based on changes in the market.

Cash Dividend

Although I don’t currently, one could look at the weekly sale of options and the resulting premium as a weekly cash “payday” or “dividend”. I currently leave the cash in my account but I could withdraw it if I want and keep the long index fund position in my account. There is not currently a way to automatically reinvest the “dividend” into more of the index fund, but one could manually do so, which would be easy and cheap in this era of reduced or zero commissions.

IMO

Think about your current portfolio, and think about what it would be like to earn an additional current yield on that portfolio. Granted, a systematic call option writing strategy necessitates discipline and minimizes the investor’s ability to sell quickly if and when they want to. However, if you are a long-term investor and the additional current yield is appealing, you may want to contact me to determine how you might avail yourself to this strategy.

Low Rates!

This article from the Wall Street Journal caught my eye. It says that the US Government may decide to address the increased level of debt that it has incurred as a result of the various stimulus programs meant to address the Covid-19 economic shutdown through use of a policy called “financial repression”. It sounds bad, and it can be bad for banks and for people who want more income from their savings, but it isn’t as bad as it sounds for most people.

Financial Repression

A financial repression policy has several elements and requires coordination among the fiscal (Congress) and monetary (Federal Reserve) sectors of our government, which isn’t easy to pull off. Here is a list of the elements of financial repression that all need to be implemented at the same time for it to be effective:

  • The Fed keeps interest rates very low;
  • US Banks would be required to hold low-rate US government debt as a percentage of their assets on their balance sheets;
  • A cap is placed on the rates that banks can offer to depositors;
  • Banks would have higher restrictions on their ability to invest in international markets or securities;
  • Higher bank reserve requirements; and
  • Fiscal restraint, meaning Congress shouldn’t spend more money that it already doesn’t have. This may be the most difficult part of this to pull off.

By “repressing” the financial/banking sector and thereby preventing it from sucking profits out of the US economy, a financial repression policy aims to stoke private sector profits and therefore stoke tax revenues that will pay down the US Government’s debt.

Savers Suffer

It all sounds like a good policy. Who isn’t for more corporate profits and more tax revenues (except for socialists and anarchists)? Unfortunately, the sector that gets hurt is Savers such as the elderly on a fixed income who rely on safe investments such as bank CD’s for their income. If US Treasury rates remain low, then savings rates will also remain low. On a macro level, in a financial repression scenario, Savers forfeit a portion of the income from their savings to the Government so that the Government can pay down its debt.

The Upshot: Rates To Remain Low

What you should take from this blog post is that you should expect interest rates to remain low for the next several years. Federal Reserve Chairman Jerome Powell said as much in his press conference last week wherein he said, “We are not even thinking about thinking about raising rates”. This is bullish for corporate profits and therefore stocks, perhaps with the exception of the banking sector. The purpose of financial repression is to grow the economy, grow taxes derived from the economy, and thereby grow our way out of our increased debt levels.

Buy Stocks

This means you should buy stocks as a long-term investment. I recommend index funds for the bulk of your stock investments. Yes, there are a lot of uncertainties surrounding our current economic situation related to Covid-19 among other issues. However, if you are thinking about 5 to 10 years down the road, if the US Government pursues a financial repression policy, or at least elements of it, then the long-term payoff of buying stocks now and owning them for that long could be good and should outperform the alternative of investing in Government bonds or bank savings vehicles such as CD’s.

IMO

The WSJ article that financial repression worked in the US, Great Britain, and other countries after WWII, and that it is much more doable and palatable than other debt-paydown strategies such as a sharp rise in tax rates. Look for such policies to be implemented once again in the US once we are deemed to be through the worst of the Covid-19 crisis, which hasn’t happened yet. Policies to stoke growth are one thing, but keeping government big spenders in the legislative and executive branches in check will be the larger trick. Therefore, I expect the monetary side of the equation to be implemented while the fiscal restraint side not to be implemented. The result will be something like a return to pre-Covid levels of new government debt of $500 Billion to $1 Trillion annually, after which Congress and the President will declare victory while US debt levels will continue to mount, albeit at a lower rate than during the middle of the Covid crisis. I guess that’s sort of a victory, but it should all prove good for the stock market, in my opinion.

Savers: Are you seeing a dismal future for investments that generate income and are looking for an alternative? Please stay tuned to this space.

Vegas, Baby!

Some Las Vegas casinos are opening up with precautions in place and social distancing in play. Shows are scheduled to reopen slowly in July and more so in August. Do you think visitors are ready to return to Las Vegas in a big way? Are you ready to return, or are you still concerned about Covid-19? Does gambling and merrymaking while wearing a mask turn you on? I have always been a Las Vegas skeptic and am more so now.

Stocks Hammered

Stocks of Las Vegas companies got hammered but have recovered nicely. Las Vegas Sands (LVS) lost about 50% of its market cap during 1Q 2020 but has since recovered such that it is about 28% off its pre-Covid high. MGM Resorts (MGM) was hit worse, losing about 75% of its market cap at the bottom and currently sitting about 38% below its high. Most companies have suspended payment of their dividends at least temporarily in order to conserve cash. Does the 30% +/- discount offer enough incentive to want to buy in to this sector? Or do you think we are still more than within 30% striking distance of optimal operations for these companies?

Unemployment

In addition to the illness issue, unemployment is another headwind that Las Vegas is facing. Nevada’s unemployment is in the 25% range, the highest in the country. This does not bode well for locals who want to gamble. With the national unemployment rate in the low to mid-teens, and with many still “employed” by the grace of the Paycheck Protection Program, my concern is that there will not be the disposable income out there to go to Las Vegas to gamble and go to shows.

IMO

I might think differently if Las Vegas stocks were still 50% to 75% discounted from their previous highs, but I think this is a sector to avoid. Nothing is forever, and as Las Vegas recovered from the hammering it got after the Financial Crisis 12 years ago, so will it probably eventually recover from today’s issues. I guess if you are a gambler, then go ahead and place a bet on Vegas, but please don’t go all in. Only invest the “disposable income” portion of your portfolio. Even if you are proven correct and Vegas does return in short order, I don’t think the payout for you as an investor is commensurate with the risk that you take by investing in Las Vegas stocks at their present levels.

June Gloom?

Here in Southern California we have a weather phenomenon called June Gloom. Often during June the temperature differential between the land and the ocean causes a foggy “marine layer” to encase at least the coastal areas of SoCal for much of the day. The marine layer may burn off as the day goes on or it may not, depending on how close you are to the beach. The result is mild but foggy weather that is more humid than normal for the area. Some people don’t like it – it’s harder to work on the tan during June – but I really like it because it is comfortable.

“June Gloom” At the Beach

Stocks Anything But Gloomy

Contrast typical June weather in SoCal with the performance of the stock market thus far this month. Stock performance has been a bright spot in a news cycle preoccupied with Covid-19 and racial protests. The S&P 500 is up about 5.5% so far with 3 weeks to go. The Nasdaq 100 index is up only about 2.5% this month but is now above the pre-Covid highs. Investors are optimistic that the worst is over and that we are now in the economic recovery phase. Last Friday’s report that the US economy gained 2.5 million jobs in May and that the unemployment rate dropped to 13.3% buoyed investor hopes. Is it time to go all in on the stock market? Are you already late to the game?

Not So Fast

The indicators that I watch all show that we are in an uptrend phase in stocks. That doesn’t mean you should go all in. It does mean that you can go back to your normal allocation of stocks within your portfolio. For instance, if you normally like to be at 60% stocks and 40% bonds, for example, go ahead and do that now. Moreover, just because there has been some good news recently doesn’t mean that all of the bad news is over. As states reopen their economies, there could be a spike in Covid-19 cases, or at least Covid-19 will remain with us. People will still get sick and die, and there will be reactions to this within the economy. We are heading into the Summer season now but what will happen when the weather turns colder later in the year? Research into vaccines and treatments look promising but a vaccine is no sure thing.

Discipline

I advocate a disciplined approach. Just as I advocated that you don’t panic on the way down, I advocate that you don’t panic as we emerge from the worst times. Think and act like a long-term investor.

IMO

Just because the stock market has been strong so far this month doesn’t mean you should go all-in. The road to recovery ahead still looks bumpy to me. All of this means that you should stick to your plan and be disciplined about re-entering the stock market. I realize I am likely preaching to the choir but the message of discipline is important and bears repeating.

Don’t Double Or Triple Your Fun

I was drawn to this article in the June 1, 2020 Wall Street Journal about investors who got hammered by investing in leveraged Exchange-Traded Notes, or ETNs. ETNs differ from Exchange-Traded Funds (ETFs) in that ETNs are structured as a debt instrument whereas ETFs are structured as equity and actually own equity interest in the companies that comprise the index. However, there are both ETNs and ETFs that offer the 2 times and 3 times the return objective. In the WSJ article, people lost money by investing in leveraged ETNs, wherein some bank bought the basic ETN, then borrowed money to buy more of it, and then re-offered the initial part plus the borrowed part in a packaged that promised 2 times or 3 times the return of the original instrument. So, if the ETN’s price goes up 1%, then the 2 times ETN goes up 2% and the 3 times ETN goes up 3%. What could go wrong? Lots. When the stock markets tanked through the course of March, 2 and 3-times translated to big losses for the investors profiled in this article.

Confusing

Are you already confused? Me, too. Leveraged ETNs and ETFs are confusing in their structure. They also tend not to do what they promise over a long period of time. That’s why I don’t recommend them. There are better alternatives if you want to leverage your return if you suspect that the market is going to jump, especially in the short term. More on that later.

Examples

If you have ever screened for ETFs (etfscreen.com is a great resource), you have probably seen these types of “2X” or “3X” ETFs . Banks such as ProShares and VelocityShares offer products such as the SSO, which is the 2X S&P 500, or the UGLD, which is the 3X on the price of Gold. Even more complicated are the Reverse 2X and 3X products, wherein the product moves in reverse relative to the underlying index. Most of the well-known indexes – the VIX, the Nasdaq 100, Russell 2000, All of the Dow Jones Indexes – have 2X and 3X derivative products that one can invest in. My advice: Don’t.

Returns Don’t Work Out

In my experience, just because a security offers the promise of a 2X return doesn’t mean you will get a 2X return. Let’s take one example: The SPY vs. the SSO. The SPY is the ETF for the S&P 500 Index, and the SSO is the ETF for 2X the S&P 500 Index. Here is a chart for the SPY, which shows the index to be currently trading about 7% below its pre-Covid high:

Now, here is the chart of SSO. If SPY is down 7%, then you might expect SSO to be down 2X or 14%, correct? Well, no. The SSO is down about 23% from its pre-Covid high. Not the 2X return, but something more, which in this case is worse for the investor:

Why don’t returns match what is promised? Because of the cost of the leverage and because of additional financial engineering through the use of options and the deteriorating value thereof due to the passage of time. It’s complicated, and that’s why I think you should stay away from these.

Alternatives

If you think a particular index is due for a jump one way or another, it is better to just buy call or put options on that index. They are much more straightforward, and your downside is that you lose the amount of the premium you paid to purchase the option. They won’t tank your entire portfolio or net worth, which is what happened with these poor souls in the WSJ article.

IMO

When you are offered 2X or 3X the return on a particular index or security, beware! They don’t work out as promised, and while your upside may be magnified, so might be your downside. It’s much better to be safe and invest in the standard 1X ETFs and buy your own options if you must. A more significant piece of advice is don’t do any of this without professional help. Contact me or your own financial advisor if you want such assistance.

Don’t Let This Crisis Go To Waste

You’re stuck at home, perhaps even happily so. Entertainment options are limited – TV and takeout, and maybe increased at-home alcohol consumption. Can’t go out to eat – although that is becoming more available as time goes on. Gas is cheap but there’s no where to drive to including to the office. Shopping for new clothes is off the table with many shopping centers closed and, besides, who needs new work or school clothes when your day is spent in front of a computer in your own home?

Look At Your Spending

What can you do for fun? For one thing, it’s an excellent opportunity to review your current spending and project what your future spending might look like after the shutdown and compare that with what and how you used to spend before the shutdown. I will wager that a lot of us can see that we don’t really need some of the things we spent money on before and can cut down or cut out some needless spending going forward. Here are some things you can look at:

  • Restaurants: We all miss having someone cook for us and serving our dinner and not having to clean up afterward. Yet, do you like ordering food to take out or have delivered to your door? There are at least a couple of benefits to ordering take out, both related to alcohol: a) You can go to the grocery or liquor store for your drink of choice and it will be a lot less expensive (per serving, at least) than ordering drinks at the same restaurant; and b) Drink up! No need to worry about drinking and driving since you are already home.
  • Movies: I wouldn’t want to be long on in-person movie theaters at the moment. Many states have yet to ok them to open up again, and so they are losing money there. Some movie studios are bypassing the in-person theater release and heading straight to streaming. Do you miss going to the theater? Or is watching a movie in your living room good enough for you? Netflix and the like are not without cost but they are still less than a night at the movies, especially if an entire family is involved.
  • Your Car: How does this new Stay At Home situation change how you view your car? Do you really need a high-end expensive car? If you are a couple, married or otherwise, do you each really need a car or can you get by just fine with just one car? Gasoline may be on the cheap side now, but don’t plan on it staying that way for the long term. Some project that the shutdowns by some oil producers will remain permanent which will lead to much higher oil prices once the economy heats up again.
  • Your Home: Are you happy in your current home? Or do you live in a hovel because you work so much and now that you aren’t at the office you want a nicer place to live? Do you want to upgrade your current home? Paint and carpet are not that expensive but other upgrades may be, especially if they involve blowing out walls. Perhaps you can look at spending less on other things associated with your “work at the office” life and spend more instead on your home. Or maybe this amounts just to buying a new office chair and a new couch.
  • Personal Appearance: Do you enjoy cutting or coloring your own hair and doing a self-mani-pedi? I didn’t think so. Probably no budget cuts there. However, how does nice, expensive clothing fit into the equation in the future? If you are going to be out in public less, probably you don’t need to up your wardrobe budget. On the other hand, maybe you do need to up your game with respect to your at-home appearance.
  • Saving For Retirement: How does all of this change how you are viewing your retirement and when you want to retire? Does this make you want to retire sooner – assuming you haven’t already been forced into “retirement”? Or are you the groundhog who sees his shadow and gets scared and scurries back into his hole? This shutdown should cause you more specifically to focus on the timing of your retirement and to make or change your plans accordingly.

IMO

Make the best of a bad situation. Don’t let this crisis go to waste. However you want to phrase it, my point is that you should use this shutdown and change in your lifestyle, whether forced or voluntary, temporary or permanent, to think about how you spend your money and whether you can make changes now that will make your future easier to afford.

By the way: I have written this column with the assumption that you have choices that you can make and that you don’t need to struggle every day to put food on the table for your family. If you have been laid off after having lived paycheck to paycheck, you likely have a different perspective about all of this. We all hope that the economy does recover and that we all can get back on our feet again.

Is “Stay At Home” Like Retirement?

Well, is it? I think it depends on your circumstances and your mindset. I know, it’s an equivocal answer, but let me explain.

Laid Off

If you are at home because you were laid off and you need to get back to work to support yourself and your family, then our current situation is likely not like early retirement. If you need to work to support yourself, you likely are younger and and not even thinking about retirement, early or otherwise. You are likely not happy about being home now and are working hard to get rehired or at least get back into the workforce. It is likely a stressful time for you.

Happily Laid Off

Perhaps you are happy that you were laid off, or at least not upset about it. You live within your means and you may have needed a mental break. Is this current time away from your job meeting your expectations? Here are some thoughts on how to answer that question:

  • Are you productive outside of work? Do you have a need to accomplish things that was previously satisfied by your job? And, if so, are you currently satisfied with how much you are able to accomplish now that you are not working?
  • Social Interaction: Do you miss the social aspects of your job? More or less than you thought you might? Do you have a family or close social relationships outside of your job that satisfy your social needs without the work part? Some people postpone their retirements not because of the money part but more due to the social aspects of their jobs. Don’t consider yourself “weird” if you don’t miss the money but do miss the people you used to work with.
  • Travel: Did you previously envision that your retirement would involve a lot of travel? And now that you are at home and likely unable to travel, are you disappointed? Do you think that you would be happier if you could travel more? Or do you miss travel less than you thought you would? Being stuck at home can be fun for some but can grow boring for others. Some like a daily routine while others need constant new stimulation. If this Travel issue is a big one for you, then don’t equate your current situation with what it would be like to be retired. And, if you do really miss the travel, then take a second look at your finances to see if you really have enough money saved to indulge your travel urges.

Still Working At Home

If you are still working from your home office, then this experience is not like retirement, but perhaps you can envision retirement from in front of your Zoom camera. You can see what goes on in your home and in your neighborhood while you would otherwise be at the office at work. Do you like what you see? Do you like where you live? If not now, perhaps with some modifications? If any of that is true, then how does that change your retirement plans? Many in the media are projecting that the “work at home” experience will remain with us even after the All Clear is sounded. Building landlords are concerned that their tenants will want to downsize their space or eliminate their real estate needs altogether. Are you enjoying “work at home” as much as the traditional office? Going forward, would you consider a job situation that would entail you working at home? At least your commute would be a lot easier, right? High tech companies seem to be at the forefront of allowing employees to work at home at least some of the time, and we will see how the remainder of traditional companies move to allow their employees also to work from home at least some of the time.

Part Time

I’m guessing that a lot of people would enjoy working from home especially if they could do it on a part-time basis. This may be the best of all worlds: social interaction and a sense of accomplishment through working but without the hassle of the commute; salary and perhaps even benefits such as health insurance; more time for yourself and your family with fewer work hours and no commute; perhaps less need to spend on wardrobe and other things that aren’t as necessary if one is working remotely. The demographics of an aging workforce means that there will likely be a growing component to whom a part time situation will have a lot of appeal. We will see over time to what extent companies adapt to part time employees, if at all. Prior to this shutdown, unemployment in the US was in the mid 3%-range, which indicates that there was a shortage of workers in some areas. With unemployment spiking due to (hopefully) temporary layoffs, the job market has become more of an employer’s market than employee’s market, which doesn’t bode as well for people who now want to work part-time. Nevertheless, as the hoped-for recovery moves forward, look for part-time opportunities to open up because more and more of our aging workforce will want it.

IMO

If nothing else, this economic shutdown is providing all workers whose work lives are affected by it with the opportunity at least to consider more closely what they want their retirement to look like. Given this experience, when you have the chance to do so, you should consider what your retirement budget looked like prior to the shutdown, and how you might change it now that we are in the midst of the shutdown and you have perhaps a better idea of the specifics of what you want your retirement to be like. Do you need help in thinking any or all of this through? Please contact me, and as a CFP® Professional, I can help you develop a retirement plan that meets your needs.