Getting your 401K back on track post COVID-19

Alex Reffett, Principal at East Paces Group, joins The Final Round to discuss how Baby boomers and Gen-Xers can work to recoup their market losses for retirement.

Video Transcript

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- Now it is time for Retirement Ready, sponsored by Fidelity Investments. And today we're talking about investing in the period of COVID here, specifically how to look at retirement savings and potentially protect your savings against any recession-related volatility. We are joined by Alex Reffett, who is the group principal or principal co-founder with East Paces Group, joining us from Atlanta today.

Alex, it's good to have you on today. You know, when we're talking about protecting your portfolio or your retirement savings against any kind of volatility, but it seems like we've had nothing but volatility the last two months. I mean, what have you been telling your clients as we've seen the market moves related directly to the pandemic?

ALEX REFFETT: Yeah, thank you for having me. One of the primary things we do with clients is make sure they're prepared for things like this, especially if they're approaching retirement. So really it's just more of an emotional counsel because you've certainly got buckets of your portfolio that are going to be exposed to that degree of volatility. So you really just want to make sure we're making rational decisions in periods like that.

You know, obviously you don't want to be fire saling your investments a couple of months ago when we had periods where the market was swinging 10%, 11%, 12% a day. So really it's just more of a behavioral council because we feel like we've done a pretty good job with the allocation part going into it to-- because these kind of things just happen. You've got to be ready for them.

- So we've made it through these huge swings, right? And now we-- things are different. We're getting all this economic data. The market's still doing really well. You've noted that Gen Xers and boomers are kind of the most fragile in this environment. What do you say to somebody who calls and says, I just-- I just think this is going to take a really long time. I don't think that the market's appreciating where we are, and I would like to-- to step back. I just think this is going to go down. Do you counsel somebody to stay in the market, that you need to be invested? Or are there people where you're like, OK, I get it. Let's go to the side here right now since we've gotten through this.

ALEX REFFETT: So most of our management is done very actively. So we'll make pretty aggressive moves, even in cash at times where we think that risk levels are elevated. So certainly, if it calls for it, we'll do it. But, you know, those Gen Xers, those boomers that are-- have just retired or approaching retirement, what I've told many of them, especially new clients, is that, you know, now is a great time-- the Fed took some pretty aggressive measures to intervene here and has really helped stabilize the market.

We're within 10% of where we started the beginning of the year. So now was a really good time to evaluate if you were doing some things, you know, that probably weren't prudent for surviving this kind of volatility or an extended recession. Now is a good time to be making changes. You know, 35% ago, it was kind of hard to, you know, really make any drastic changes to your portfolio. You were kind of stuck in it. You needed to ride it out.

But now we're at a time where you can actually make some strategic rebalances, fix any errors that you may have had or overallocations you may have had, and just rejuvenate your portfolio to be prepared for what may be a long-winded healing process for the economy.

- And to that point, since you are active and sometimes you say, like, if you need to, you do do a bigger cash position, I guess what are you thinking right now? We have so many people that come on the show and say, gosh, this market doesn't make any sense with the economic data we're getting.

ALEX REFFETT: Sure. There's a couple things. One I mean, I certainly think that oftentimes people conflate things like unemployment with the markets, which isn't necessarily something that's going to work in sync. I mean, companies have shown that they're willing to lay off employees in favor of retaining profitability. So companies are actually likely to be able to perform a little bit better than people expect, even while they're laying people off.

So it really kind of comes to, you know, their priority and their duty to shareholders. So I think it's-- in certain cases, another thing we think is that, you know, we're obviously in a long-term tech bull market. So different industries are obviously having very different experiences right now. You know, you can obviously see the difference between the NASDAQ this year and the Dow this year.

So there's certainly opportunities out there, certainly companies that are much more nimble and able to handle this type of recession, this type of change in workers' lifestyle better than others.

- OK, Alex Reffett, principal and co-founder with East Paces Group, thanks so much for joining us today.

ALEX REFFETT: Thanks for having me.