I am concerned that I might loose more of my nest egg with more market instability. This week has already been brutal. Do you have any tips on what senior citizens can do to safeguard their 401k, IRA, or cash investments from another recession period?
It’s pretty simple right now. Don’t do anything. Research has shown that people who react emotionally to swings in the market do far worse than those that are in it for the long haul.
What you might do is call your investment manager or bank representative and talk about the option of rebalancing your portfolio. You don’t want to be overweighted in any sector (for example real estate or small caps) that could open you up for huge losses should the market crater in that area. Ask them if it would be a good idea to rebalance to a safer sector like (large cap stocks or bread and butter consumer staple companies).
Many seniors over the last few years have pulled their money out of the stock market for fear of loosing any more money. There were shocked by the market downturn in 2008 and haven’t felt ready to get back in. Right now however stock/equity investments are at the most attractive valuations they have been in the last 5 years. Stocks are trading right now at historically low price to earnings (P/E) ratios, making them look very cheap. For standard boring bread and butter type companies that make everyday products, they are currently paying very attractive dividends in the 3-5% range. If you can find 4-5% return on your money right now, you are one lucky person.
So some smart people are getting back in to the market or riding it out because they know there is plenty of opportunity being created right now.
Overall seniors have done the best financially out of any age or income since the market downturn in 2007/2008. According to a Census Bureau report: The 31 million households headed by people 65 and older saw their median income rise by a healthy 5.8% in 2009 after inflation and 7.1% since the recession began in December 2007.
All other age groups suffered losses to their investment over 4%, says the Census Bureau.
The group that suffered the worst losses in all areas was young people in the 18-29 age range. Most saw their investment wiped out, poverty grow, and is currently the largest group without health insurance in the US. Mainly because no one can afford it anymore.
Seniors should could themselves very lucky. So hold the course with your investments if you can and if you can’t stand to ride out the market then get out. As one investment broker told us recently “if you pull your money out at every market downturn, then you have no business investing in it in the first place.”
