Amongst the many news stories about the Coronavirus and how it has changed and affected everyone’s lives, there is no shortage of financial news.  The economy is effectively shut down. Most white collar workers have comfortably shifted to working from home. Blue collar workers and gig workers, however, are feeling the financial strain.  They’re waiting for their government checks while desperately trying to figure out how to pay their rent, food, and utility bills.

I had never thought much about money and finances until I started my own veterinary practice.  You can’t run a successful practice unless you know something about business, and owning my own hospital was a crash course in financial management.  Not only did I learn about how to run a business, but I educated myself about personal finance and investing. As the practice grew, I began saving and investing more, setting up a retirement account and a non-retirement account, and figuring out the best ways to manage them.

I subscribed to Money magazine and Kiplinger’s Personal Finance, and immersed myself in the world of index funds, asset allocation, diversification, ETFs, and other financial things I previously knew absolutely nothing about. This knowledge became especially important when I sold the practice and retired.

Before retirement, your mindset is one of accumulation: you save and invest, save and invest, save and invest.  Then retirement arrives, and you have to shift from accumulation to preservation: make it last, make it last, make it last. It’s a radical shift in thinking.

As a retiree, I no longer have an income. My focus is to manage my nest egg so that it lasts for 30 years.  Early in your financial life, your savings and investment portfolio is heavy in stocks. It makes for a bumpy ride, but the direction tends to be up, up, up.  As you get older and retirement gets closer, you’re supposed to shift from mostly stocks to a more equal mix of stocks and bonds. Bonds don’t grow as fast as stocks, but they don’t sink when the market goes down.  They provide stability to the portfolio, and this is crucial when you’re near retirement. The last thing you want to deal with is a huge loss in your portfolio just as you’re about to stop working and begin living off those funds.

Exactly how much of your portfolio should be comprised of stocks depends on your goals and your risk tolerance.  They used to say that the percentage of stock in your portfolio should be 100 minus your age. So if you retire at 60, you should have a portfolio that is 40% stock and 60% bond.  Then, most financial publications began singing a different tune and changed the formula to 110 minus your age.  They said that a 40/60 portfolio was too light in stocks and would not grow sufficiently, after you factor in inflation.  Most people now felt that in retirement, your portfolio should be somewhere between 50% and 60% stocks. Because I retired early (at 57), I needed to maximize the chances of my money lasting 30 years, so I went with a 60% stock/40% bond portfolio. It entails a bit more risk than a 50/50 allocation, but over the course of retirement, the extra investment in stocks gives a little more oomph to the portfolio.

As a retiree, I no longer have an income.  I chose Vanguard as my brokerage firm, as they are famous for having low fees (this saves you thousands of dollars in the long run), and I have a financial advisor who I respect and trust.  We agreed that a 60/40 portfolio was indeed very suitable for me, and over the years it had grown nicely, especially these last ten years, during this unprecedented bull market.

Then the Coronavirus changed everything.

As I sit here writing this, the stock market has dropped about 27% from it’s previous highs.  Because my portfolio is 60% stock, I would expect my portfolio to drop about 16%.  In fact, it dropped a little less (15%), probably because the bond portion of the portfolio actually gained a little. (As stocks decrease, bonds tend to increase. But not always.) Yes, it is upsetting to see years of relatively steady gains disappear in the course of a month, but most retired and retiring folks are experiencing the same thing I am.

Will the market continue to drop? Nobody knows for sure, but I expect it will.  Last week, while Congress was debating the stimulus bill, the market surged, experiencing the biggest one day gain since 1933.  The next day, optimism was still high, and there was another huge increase. On Friday, I guess reality set back in, and there was a massive loss again (over 900 points), and as I write this on Sunday, I have no idea what the next week will bring.  Right now, the market seems to be running on emotion; a glimmer of good news sends the market soaring, while an ominous news story sends it plunging. The actual financial health of the companies almost seems immaterial. But there is no doubt that a recession is coming, and the unemployment rate will soon skyrocket, and it only seems logical that we’re in for a big, big plunge in the weeks ahead.

SEE ALSO: De-Stress Yourself: How to Keep Your Anxiety From Interfering With Your Investing

Bull markets don’t last forever, so about two years ago, I did what all of the financial magazines (and my financial advisor) recommended. I put aside enough cash (high-yield savings account, money market funds, certificates of deposit, etc.) to live off of, while waiting for the hammered stocks to recover.

Opinions vary, but most advisors recommend putting aside 1 to 2 years worth of money.  I’m a cautious person by nature, and I put aside enough cash to get me through 5 years of expenses.  Some people would argue that this was crazy; that money would have earned much more if I had invested in the stock market, I’ve been told.  I don’t care. The peace of mind that this has given me, knowing that I can fund my retirement for the next five years without having to sell any stocks at a loss is worth the theoretical lost income from not investing that money.   And it’s not like that money sat in a checking account earning 0.04% interest. Some of it sits in a savings account earning 1.6%, some is in a money market fund earning 1.4%, and the rest is in CDs that earn around 2.8%. Not too shabby, really.   My big expenses in retirement have been related to travel. Now that there’s no travel in the foreseeable future, no dining out, no clothes shopping, no movies or concerts or shows, I’m barely spending any money (other than food), so the emergency fund should last me well beyond what I had anticipated.  I feel very fortunate.

With no income, I’m sure I qualify for the government relief check that should be arriving in the next two or three weeks.  With my emergency funds put aside, and having a partner who is still working and collecting a paycheck, I really don’t need any government assistance.  My plan is to donate that money to a charity. I’ve spent a good part of my retirement trying to give back to the community, mainly working with animal-related charities.  My inclination is to donate to veterinary causes, but I think I may donate this money to charities that are helping people. The amount of human suffering that this pandemic is causing is really overwhelming, and at least this gives me an opportunity to help others.  

The freakiest thing of all is seeing the changes in New York City.  Stores, restaurants, cafes, coffeeshops, bars…all closed. Only pharmacies, supermarkets, bodegas, liquor stores, and some fast food places (Dunkin’ Donuts) are open.  Very few taxis on the street. I used to bitch about the streets being so crowded that you could barely walk. Now they’re empty, and it’s bizarre. People are still out and about, especially in parks.  New Yorkers love their dogs, and these dogs have to be walked. I get cabin fever after sitting around for a few hours indoors, so I will go out and stroll around, eventually settling on a bench in a park, where I can read a book or magazine safely away from others.

I am afraid. I never used to watch the news, but I’ve been watching every morning and evening, and what I see is terrifying.  I feel I am in a bubble. I’m at home with Mark, feeling safe and secure, while the television broadcasts images of people on respirators, stories of supply shortages, overwhelmed hospitals, lack of equipment, etc.  I feel as if, at any moment, I could suddenly start feeling feverish and the next thing I know, I’ve transmitted it to Mark and we’re both in the hospital, on the front lines where the battle is taking place and people are succumbing.  Are these feelings justified? In a month, I’ll be 60. I’m in a higher risk group now. It’s scary. My sister is 64. Mark’s parents are in their 80s. It’s troubling.

CONTINUE TO PART 4