Most investors (73%) have experienced at least one major financial setback of some kind in their life, according to the Ameriprise Financial Comebacks study.
The most common financial setbacks among investors in the past are typically the same setbacks we are seeing during the pandemic.
The good news is that with time and deliberate actions, 89% of those investors have made a comeback or are on the path to recovering.
Many individuals experience at least one major financial setback at some point. And while it’s costly and takes time to recover, 89% of those we surveyed either made a comeback or are on the path to recovering.
Ameriprise conducted the Financial Comebacks study1 to gain a deeper understanding of how consumers overcome financial challenges. During this time when many individuals are facing financial hardships and health risks, findings from this study provide valuable insights to discuss with your financial advisor.
Read the full research report
Top 5 setbacks and tips for preparing a comeback
Nearly three quarters (73%) of individuals reported at least one financial setback in their lives. Here are the five most common ones along with actions to consider.
1. Market losses
If the value of your investment portfolio decreases during market volatility, you might feel tempted to make changes or move to cash. Stay invested if you are able. Talk with your advisor if you are concerned or if your goals or risk tolerance have changed.
2. Earning less money than expected
A pay cut during this challenging economic period may not result in a setback. If you don’t have an emergency cash reserve, work with your advisor to find ways to free up additional cash. If you are working, establish or maintain three to six months in a cash account. The No. 1 step investors took to prepare for unexpected financial events is setting aside an emergency savings fund.
3. Job loss
If you experience a job loss due to COVID-19 pandemic events or for any other reason, reduce unnecessary expenses and speak with an advisor to understand your options. For those who qualify, the CARES act may provide additional financial support. And try to avoid tapping into your retirement accounts as there could be impacts to taxes and future growth.
4. Supporting family members financially
It’s natural to want to help loved ones through a financially difficult period. Remember the airplane analogy: Put on your own oxygen mask before assisting others. So make sure your financial life is in good order before offering help. Also, make sure you have a clear understanding of whether the help you are providing is a gift or a loan and that you don’t put your own financial situation at risk.
5. Bad financial decisions
During the current period of economic stress and health risk, judgement can become clouded. Avoid making impulsive short-term decisions. Lean on your financial advisor for targeted and customized information. They know you and your situation and can provide personalized financial advice.
Estimated cost of most negative setback
Among those who experienced a setback
A financial comeback takes time
Most investors in our study (89%) have made some level of comeback ranging from a partial to full recovery. Some investors (21%) even said they are better off financially.
A key takeaway from the study is that financial comebacks take time, often several years. Nearly two-thirds of investors said it took them between one and five years to get their finances back on track.
Making a financial comeback
The most common financial setbacks among investors in the past are typically the same as those we see today. If you’re currently facing a financial setback, consider taking the following actions with personalized advice and support from your Ameriprise advisor.
✔ Meet with a financial advisor
During difficult times, meeting with a financial professional can be more helpful than ever. Talk with your advisor to guide you through financial decisions to help you get through this difficult time.
✔ Stay focused on your goals
Don’t make impulsive decisions that could have a negative impact on your long-term goals. Stay calm and stay the course. Ameriprise clients can view goal progress online — any time, from any device.
✔ Scrutinize your expenses and monthly budget
Look at your budget with a critical eye. Decide what spending is necessary and what’s discretionary. Cut out or reduce unnecessary expenses.
✔ Avoid tapping your retirement accounts
There are many drawbacks to taking an early retirement plan distribution including the taxes you may face. Also, an early withdrawal reduces the size of your retirement nest egg, and the funds you’ll withdraw will no longer grow tax deferred.
✔ Invest in ongoing financial planning
Tracking your goals and progress — any time, from any device — can help you feel confident, connected and in control of your financial life.
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There’s a sense of confidence that comes from feeling in control of your finances – and working with a financial advisor can help you get there. Please share your experience and tell your friends and family about me.
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1 The Financial Comebacks study was created by Ameriprise Financial, Inc., and conducted online by Artemis Strategy group Jan. 2 – 20, 2020, among 3,042 U.S. adults between the ages of 30 – 70 with at least $100,000 in investable assets. For further information and details about the study, including verification of data that may not be published as part of this report, please contact Ameriprise Financial or go to ameriprise.com.
2 Ameriprise Financial Market Segmentation Refresh, February 2019. Base: Total market $100k+ in investible assets.
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