The Federal Reserve has thrown a wrench into what was shaping up to be a very good six months for investors. The Federal Reserve policy meeting and its aftermath roiled global markets as worries escalated that the economy is actually stronger than we thought -- gasp! As a result, the Fed should be able to taper its purchases of bonds this year, and eventually, it will stop buying altogether, which is what caused both stocks and bond prices to drop.
There is an irony in the timing of the market's first 2013 convulsion last month and the Fed's upgraded view: It comes on the four-year anniversary of the end of the recession. The Business Cycle Dating Committee of the National Bureau of Economic Research "determined that a trough in business activity occurred in the U.S. economy in June 2009." The 18-month recession that began in December 2007 was the longest of any recession since World War II.
Of course, it wasn't really the end. The ensuing four years have been highlighted by a slow and painful recovery, during which job losses continued, housing prices kept dropping and every step forward was met with at least two steps back. Even today, it's hard to feel upbeat about an economy that will likely grow by about 2.5 percent this year and still has 11.8 million people out of work.
The Fed acknowledges that things aren't all rosy, but, four years into the recovery, its Federal Open Market Committee "sees the downside risks to the outlook for the economy and the labor market as having diminished since the fall." Since you can't do much about the timing of the Fed's policies and the gyrations in the market, six months into the year is a perfect time to revisit the financial issues over which you actually have control: your investments, retirement savings and some of those other financial to-dos that have been on your list for a while.
Quit complaining about the markets and do something! Remember, if you are a long-term investor, periodic market pullbacks are great opportunities to rebalance your accounts so your allocation remains in check. This requires you to override your emotional urge to keep winning funds and dump those that are lagging. But that's the point of asset allocation -- different funds are supposed to move in different directions at different points in the economic cycle.
Many people say they are worried about retirement, but most of them haven't done any planning to help themselves. Any conversation about retirement must start with this easy step: calculating your retirement numbers. The Employee Benefit Research Institute's Choose to Save Ballpark E$timate (choosetosave.org /ballpark) is easy to use, or check out your retirement plan/401(k) website for more retirement tools.
Homeowners and renters insurance
It seems like the past year has seen an unusual number of natural disasters, from tornadoes to hurricanes to wildfires. Summer often brings more scary weather, so, before an event occurs, make sure that your current coverage is adequate. The three biggest mistakes people make with their homeowners or renters insurance are 1) underinsuring, 2) shopping for price only and not comparing apples to apples and 3) not reading policy details before a loss.
If you haven't done so already, please draft a will! I advise hiring a lawyer to prepare a will, a power of attorney and a health care proxy/
living will. If you insist on doing it yourself, you can use a software program like Quicken WillMaker. All of your estate documents and final instructions should be stored in a safe place -- don't forget to provide copies to your executor/trustee.
If your total estate is greater than $5.25 million this year, a revocable or changeable trust will shelter your unified tax credit against federal estate and gift taxes. Many states impose a state death tax at lower levels, so check the rules. Even if your estate is unlikely to incur estate taxes, you may want a trust to better control the disposition of your assets. Revocable trust assets are not subject to probate.
Volatile markets are always unsettling, but doing what you can now may help you feel more in control and allow you to enjoy the second half of the year a little more.
Jill Schlesinger, a certified financial planner, is a CBS News business analyst. She welcomes emailed comments and questions.