Are You Prepared for the New Year?

As we begin a new year, we must carefully evaluate whether we are financially prepared for what lies ahead in 2023. Although there were some warning signs a year ago, no one predicted that we would see the financial trauma that the markets experienced in 2022. Interestingly enough, the first trading day of the year was extremely positive – and ended up being the high point for 2022. From that day forward, the markets struggled to keep from having a massive meltdown.
 
When the stock markets closed for 2022, we had experienced the worst year for all market indexes since the Great Recession in 2008. For the year, the Dow was down 8.8%, the S&P 500 was down 19.4%, and the tech heavy NASDAQ index was down 33.1%.
 
Some of the high-flying stocks from previous years reversed course and led the downward trend. A once safe haven stock, Apple, lost 27%, while previous soaring Tesla finished the year off 65%.
 
While the stock markets were experiencing their worst year in more than a decade, mortgage rates were increasing at the largest annual rate on record. A 30-year mortgage started the year at 3.1% but ended 2022 at over 6.4%. On a $350,000 home, that increase in mortgage rates cost the average homeowner $695 a month.
 
Fueled by government stimulus during the Covid pandemic and additional supply chain disruptions, inflation reached the highest level in over 40 years, topping out at 9.1% in June 2022. By November, the Federal Reserve’s massive efforts to bring inflation under control were working to a limited extent and inflation had dropped to 7.1%. However, inflation remains a concern, and many economists predict that seeing further substantial gains in reducing inflation in 2023 will be difficult.
 
With rising prices in fuel, food, and other essential items, the consumer faced a difficult 2022. The hope is that 2023 will bring a much-needed recovery.
 
On the positive side, the Board of Directors of the Ministers’ Retirement Plan set the projected payout on the Trustees’ Fund at 4.00% for 2023. Since the financial crisis in 2008, the board has adhered to the projection of 4.00% return on the Trustees’ Fund. In some years, when the markets have performed better than expected, the board has been able to provide an interest rate bonus to participants in the Trustees’ Fund. Over the 40-year history of the Trustees’ Fund, the average rate has been 6.65%.
 
While it is impossible to predict how the stock markets will perform in 2023, most prognosticators are suggesting that it is going to be another trying year for the markets. It seems as though we may be in a cycle where the return of your money is more important than what return you get on your money. Safety seems to be paramount in investing at this point.
 
Of course, if you have many years before retirement, there are going to potentially be some great buying opportunities in the next 12 months. Buying stocks while they are depressed is certainly a way to build your portfolio, assuming we have recovery in the years ahead. On the other hand, those who are nearing retirement should begin to look at the safety of their portfolio and reduce the risk that they are taking in their investment strategy.
 
As we often say, there is no perfect investment strategy that applies to everyone. Each person, based upon age, risk tolerance, and a variety of other factors, will have different investment strategies and goals.
 
As we begin this new year, my hope is that you will evaluate your retirement contributions and your investment goals in hopes of reaching your preferred future. The staff at the Benefits Board stands ready to assist you in any way possible towards that end.
 
On a lighter note, my hope and resolution for you is that our lives are as great as our Facebook posts make them look. Blessings for a great 2023!!

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