Planning · December 13, 2021

5 Strategies for Your Financial Plan in a Volatile, Low-Interest Market

Nerre Shuriah

JD, LLM, CEPA | Senior Director of Wealth Planning

Market volatility is common and a normal part of the investing process. While this year has continued to be a bull market, it has seen its share of ups and downs, which are likely to continue.

In addition to market volatility, debt is still relatively cheap with interest rates only slowly creeping up after hitting an all-time low in August 2020.

Perhaps you're wondering how these two factors fit together. In a volatile market, extra care must be taken when considering withdrawing from or transferring parts of your investment portfolio, but certain interest-driven financial instruments can help you time transfers and cover short-term financial needs.

In this post, we'll dive into some of these suggestions and strategies.

Strategies to Consider with Market Volatility and Low Interest Rates

1 Financial Plan

Revisit your goals in your financial plan, especially your time horizon. We often find that even with short-term volatility, the long-term prospects for success of your plan remain largely the same. You may make need to make small adjustments such as reviewing your monthly budget and having an adequate emergency fund.

This is also a good time to revisit the impact of the SECURE Act on your qualified accounts, especially if you're considering working beyond age 70 1/2. The SECURE Act was signed into law on December 20, 2019, and was the largest piece of retirement legislation in over a decade. Its impact and understanding were blunted by the onset of the pandemic a few months after its effective date. Some of the significant changes that may be helpful to remember, especially in an increasing income tax environment, including required minimum distribution at age 72 and maximum age for IRA contributions.

  • Required minimum distribution at age 72: The SECURE Act raises the RMD age from 70 1/2 to 72. This increase affects individuals born after June 30,1949. Such individuals don't have to take their first RMD until April following the year in which they turn 72.
  • Maximum age for IRA contributions: The SECURE Act repealed the upper age limit preventing contributions to traditional IRAs by an individual over age 70 1/2. As long as an individual has earned income, they can make contributions to a traditional IRA regardless of their age. The rules regarding whether the contribution will be tax deductible haven't changed. As a result of the SECURE Act, deductible traditional IRA contributions made beginning at age 70 1/2 may reduce your QCD amount.

2 Line of Credit

Consider obtaining a line of credit in the event unexpected expenses occur or you want to make a large purchase during a market downturn. Having a line of credit available secured against your investments also helps avoid having to pay capital gains taxes to create liquidity.

With a line of credit, you may not need to have the full 6 months of emergency funds on hand. This is because the line can serve immediate liquid needs if necessary, while allowing what would otherwise be underinvested funds to remain fully invested and take advantage of a continued bull market. The low interest rate environment we're currently in will allow you to obtain a line at historically low levels while maintaining the arbitrage of investing in a historically high market.

3 Diversification

If market drops are difficult for you to stomach, discuss your allocation with your financial planner. You may need to adjust your portfolio into lower risk investments to dull the effects of a potential correction.

4 Refinance Debt

Interest rates continue to be low, so refinancing debt remains a good strategy for this situation. Changing the length of your mortgage can't only lower your payment, but it can also improve your credit rating and take the pressure of your monthly budget. In addition, with rising home values, refinancing can allow you to take some equity out of your home for other purposes. When deciding to refinance, be aware of the closing costs and how long you need to stay in the home to make the new loan more financially beneficial than the old loan. Keep in mind that the average homeowner moves or refinances every 7 years.

5 Conversions from Traditional to Roth IRA

Depending on your situation and concerns, it may be a good time to consider converting a traditional IRA to a Roth IRA. A Roth IRA can include tax-free income distributions for you and your heirs. Roth IRAs don't have required minimum distributions, or RMD, during your lifetime—or your spouse's, if rolled over.

Following the 5-year waiting period, the amount converted to a Roth IRA can be distributed tax-free without the 10% additional tax penalty for early or pre-59 1/2 distributions. The likelihood of higher income taxes in the near future makes these benefits more valuable. A financial planner can conduct an analysis to compare the benefits of holding or converting, and identify the crossover point. A conversion works best if you have funds outside of the converting IRA to pay the income taxes due upon conversion.

Keep in mind, the SECURE Act of 2020 eliminated the ability to recharacterize a conversion if you change your mind. The modeling analysis helps gather all the beneficial information before making the change. The SECURE Act also impacts beneficiaries inheriting a Roth IRA. Depending upon their category, beneficiaries must receive funds from the Roth IRA account via distributions within 10 years.


In volatile market conditions, it's never wise to act abruptly. If you're looking for a deep dive on your financial plan and how to ride the wave of market volatility, reach out to our financial planning team for one-on-one time with a certified financial planner.

You can also download our full Year-End Planning Guide and checklist for strategies that cover the volatile market and low interest we covered, as well as potential tax increase and high inflation rates.


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