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When the stock market hit the skids in 2008, trillions of retirement dollars were lost. Because many boomers don’t have pensions — or much beyond these types of investments — to carry them through their golden years, it was a tough pill to swallow. Those bucks were intended to take care of us for 20, maybe even 30 years.
But it’s possible there’s still an optimistic retirement out there.
MAKE A GAME PLAN
The collapse had a continuing impact, some of it resulting in good habits. In light of those losses, “What people are doing is reassessing their retirement goals,” says Alyson Ross, a certified financial planner with Bass, Moore, Ross & Associates, a financial advisory practice of Ameriprise Financial Services Inc.
This reassessment starts with figuring out what it’s going to cost you to live in retirement (after Social Security benefits), including your activities and medical care. Then you need to determine if your investments can foot the bill. This is where the advice of a professional comes in handy.
For example, explains Rudy Garcia, retirement wealth adviser with Rivanna Woods Financial Services, “If you need less money to live on, you’re going to need less money in your income-producing portfolio and more in equity.”
GET BACK IN THE GAME
As a result of the downturn, many boomers have stayed as far away from risk as possible the past few years. “We moved out of being so heavily invested in real estate at a good time, just before the crash,” says one local investor, Tracey Johnson.
However, deep corporate cost-cutting and record profits, as well as actions taken by the Federal Reserve, have caused the stock market to surge since 2009. Many boomers, including Johnson, have begun putting their dollars on the line again. She’s slowly invested more money in stocks and has lately been glad she did.
“For people who have larger amounts of money to invest, buying individual stocks that pay dividends can make a lot of sense,” says Ross. “Dividend-paying stocks increase your overall yield by reinvesting until you need the income and then provide a predictable income stream.”
Some advisers say a good moderate portfolio looks something like this: a well-diversified mix of 50 to 60 percent stocks, balanced by bonds, commodities and cash. (Stocks and bonds can be purchased individually or through mutual funds.) However, the specific allocation and investments must be based on your particular situation, including your age, risk tolerance, short- and long-term goals, and the size of your portfolio.
“Diversification is important,” says Garcia, “but more important is choosing a portfolio that allows people to reach their financial goals, based on [those] factors.”
An alternative investment for those who have maxed out their 401(k) and/or IRA is the variable annuity. These tax-deferred, securities-type investments are sold by insurance companies and can offer some downside protection from the market during your working years. They are complicated and can be expensive, though. So do your homework and seek professional assistance to determine whether they are right for you, as they are not for everyone, Garcia warns.
GET AHEAD OF THE GAME
Professionals also advise that you keep some money liquid. Ideally, when you retire you should have two or three years of living expenses in cash or short-term bonds. “This prevents you from having to sell your investments if you retire during a down market,” notes Lisa Hatcher Byles, a certified financial planner with Hatcher Byles Financial Planning. “It may also allow you to take Social Security benefits later, resulting in a larger benefit.”
In addition to restructuring your portfolio, start paying off debt and saving more. To do this, decrease spending, take better advantage of your employer’s 401(k) plan (while you still have it), work longer or get a part-time job, or even make your grown kids pay room and board.
But the best advice of all is to focus on the future. Advises Garcia: “You can’t go back and change the past. All you can do is move forward!” IB
Terri L. Jones is a Richmond-based freelance writer.
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