In past editions of “Gold News & Views,” we’ve discussed multiple times how hard a retirement portfolio can be hit by a major market downturn or recession. But what about our financial legacies and those who will someday inherit them?
In my life, family is everything. My grandparents were my inspiration growing up, and my children are the inspiration for everything I do now. So when I see reports like the November 21, 2022, one issued by the Fannie Mae Economic and Strategic Research Group still showing an expectation of a recession in 2023, my first instinct is to sit down, do my research, and see what actions I may be able to take to help shore up my portfolio.
But what actions would those be, and is it even possible to fully recession-proof retirement savings?
The sharper the economic downturn, the longer it may take for your wealth to recover.
This, to me, may be the most important point to keep in mind when examining a portfolio through the lens of generational wealth. If you’ll recall our previous discussions on the “Retirement Risk Zone,” there is a 20-year period of time (10 years prior to retirement and 10 years after retirement) when a major market downturn could do the most severe damage to a retirement portfolio. This is because a portfolio requires time to recover from a sharp downturn, and a drop taking place as you’re moving into a time of spending more than you make can extend the length of time your portfolio needs to recover from any losses.
Depending on the breadth and diversity of the portfolio you plan to leave behind, the same can be said for generational wealth. Paper-based assets like stocks don’t magically become less volatile when they’re passed on to the next generation, and I think I can speak for most parents when I say that I’d rather my children not have to wait another 20 or 30 years for their inheritance to recover from an economic shock. While I want my financial legacy to continue to later generations, I believe that the point of creating generational wealth is to provide both comfort and, more importantly, a financial safety net my loved ones can turn to in times of need. Times, for example, like during a recession.
Diversification is a key strategy for helping reduce the negative impacts of a market downturn.
On November 22, 2022, Forbes published an article titled “Recession-Proof Industries to Pump Up Your Portfolio,” pointing toward sectors like healthcare, consumer goods, and transportation as being those more likely to weather a financial storm. The article also pointed out that diversifying “among a range of asset classes, industries, and market caps can further weatherproof your portfolio.”
By diversifying your wealth, you may help lower its overall risk exposure. Lower risk means more protection in times of financial uncertainty. And just as a retirement portfolio is often built for long-term growth, a generational wealth plan may benefit from even more diversification and long-term strategies. This is why real estate is often considered the cornerstone of generational wealth—it is an alternative asset class that has historically shown impressive growth over long periods of time.
There’s another alternative asset class that has shown impressive long-term growth and can serve an important role in your generational wealth strategies: precious metals.
Precious metals are a time-tested alternative asset with a long history of use as a hedge against recession.
As our Senior IRA Strategist, former U.S. Mint Director Edmund C. Moy, says, “Gold will never be worth nothing.” For thousands of years, physical gold has served as a medium of exchange and a store of wealth—a way for people to literally hold their and their family’s financial future in their hands.
Because of their physical nature and histories of long-term growth and use as hedges against economic volatility, uncertainty, and recession, gold and other precious metals can become essential parts of your generational wealth plan. I appreciate knowing that I can leave something physical behind to my loved ones that can help provide both protection and peace of mind with regard to their financial futures. Gold is an asset that may respond—and has historically responded—differently or even inversely to market factors that can send stocks tumbling. In times of recession, gold has often experienced jumps in price, reaching new historic highs.
When I think of what I want to leave behind for my children, I think of comfort, peace of mind, and financial protection. I believe that physical gold can play an important role in making that happen.
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