How will the 2020 election affect the economy?

MINNETONKA, Minn. — There's a lot on people's minds as we get closer to the 2020 presidential election. One big thing: money. 

Elijah Kovar from Great Waters Financial joined KARE 11 News at 4 to talk about how past elections have impacted the economy -- and how to protect your financial future. 

What do we need to know about presidential elections and our economy? 

Kovar said we can't predict what will happen, but we can look back at history to gauge stock market performance in an election year. The stock market ebbs and flows with a four-year election cycle. Historically, market performance is worse in the first half of a president’s term as compared to the second half. 

Kovar said some believe party affiliation matters when it comes to stock market performance. While history shows stocks have performed slightly better under Democratic administrations, performance hasn’t varied much when either party is in the White House. 

Elections are something we keep an eye on, but they are not something that should be driving investment decisions, Kovar said. You should have a comprehensive plan in place to get you to -- and through -- retirement.

RELATED: What is a K-shaped recovery? Explaining the split response to the economic downturn

How does election night uncertainty play into our investing?

Kovar said emotions are the driving force behind a lot of investors’ decisions.

"Oftentimes, I see people get fearful when the stock market takes a dive and they pull out of their investments," he said. "Then, when the market starts rising, they want to buy in."

Kovar said emotions can have us buying high and selling low, which are both big mistakes.

"These mistakes can be costly to your financial future," he said. "If you are feeling uncertain or fearful, consider working with a financial professional who can help take some of the emotion out of your financial decision making."

RELATED: Retirement planning: How much should I have saved in my 401(k) at age 40?

Am I prepared for turbulence on Wall Street? 

According to Kovar, you should ask yourself these questions.

• Am I set up for the long term? 
  • Your 401(k) will fluctuate with the ups and downs of the market. This is a good time to take a look at your accounts and know what you own, but it may not require any action. 
  • Investors need to think long-term when making major changes in asset allocation. 
  • If certain stocks are performing poorly at this time, that doesn’t necessarily mean you should make an adjustment in your portfolio.
• What is the purpose of my investments?
  • You should know the objective and time frame for each of your investments, and do the math to figure out the gains you will need to meet that purpose. 
  • For example, you may need a 5% return on an account in order to keep up with your withdrawal rate in retirement.
  • If you are chasing 8% or 9% returns, you are taking unnecessary risks with your money. 
  • As Warren Buffett said, “Never risk what you have and need for what we don’t have and don’t need.”
• What is my time frame?
  • Younger workers in their 20s and 30s have time on their side to wait for stocks to bounce back. A big dip in Wall Street can be devastating to someone who needs their 401(k) to fund their retirement in a few years. 
  • Your investments should be diversified and have appropriate risk for your age and how close you are to retirement. 
  • A good guideline is the Rule of 100. Take your age and subtract it from 100 - that’s how much of your portfolio should be exposed to riskier investments, like stocks.
  • For example, if you’re 30, you might have 70% of your investments in stocks, the other 30% in lower-risk investments. But once you are 60, you should only have 40% of your portfolio exposed to risk.
• What can I control? 
  • Let’s face it, we can plan and prepare for turbulence on Wall Street, but we can’t control it. However, we can control other factors, like how much debt we take on and what we put into our retirement savings. 
  • Americans are underprepared for retirement. Even before our current recession hit, nearly two-thirds of those in their 40s reported having less than $100,000 in retirement savings. 
  • You can get an idea of how much you should have saved with a retirement calculator. 
  • A financial professional can help you refine that number and create a plan to get you there.