Market Plunges Have Retirees Running Scared

“There are a lot of funds out there that people are selling that are good funds, theyre still well managed,” says English. “Unless they have to sell them, if theyve got good well managed funds with competent managers, I dont recommend doing that,” he says.

“It goes back to why the investments are there–to outpace inflation, to give you longevity on your money,” adds Johnson. “Granted, were not seeing it today, but there was never any inferred promise” that gains would occur every year. Rather, she says, you have to look at it long-term, “in a rolling 10-year period.”

Johnson notes that retirees should revisit their goals and analyze why they chose certain investments in the first place. “If those are still good reasons, they should sit tight,” she says.

Axley explains that as a trusted advisor, its important to make sure your clients dont get swept away with all the hype going on at any given time.

But many investors did get swept away with the hype of the 90s bull market. And now with the hype associated with a massive downturn in the market, some are concerned that perhaps they should postpone their retirement.

“I think that at this point people are looking at it [the market] and think its going to have a long-term impact on their ability to retire. Depending on how far out they are, I think that remains to be seen,” Johnson says.

“If retirees have diversified their assets and investments, they have some fixed assets they can go to that are not adversely impacted by the market. The assets we are taking money out of are more in the fixed area than in the growth area. And in the growth area are the assets that are designed for use later on in the retirement years,” Axley says.

For those retirees who have limited fixed assets to draw upon, Axley helps them identify fixed assets in their portfolio they may not have realized they had, such as cash values of life insurance. “Well use some of those dollars to get us over the hump of the devaluation of their retirement portfolio, but theres always a limit to how much you can do,” he says.

“Some people are tightening their belts, theyre trying not to spend as much,” says English. “Some of them who have good understanding of the market are even putting more in on a dollar cost average basis,” he says.

Johnson adds that some of her clients who have retired are also looking at their expenses, trying to cut back to save a little more to compensate for the market drop.

“Theres always a few things you can do, you can save more money, you can work a little longer and live on a little less,” she says.

In order to look at the market going forward, many planners are looking back at the past. “What were going through right now, some people think is new,” says English. “But its not new. Not new at all. Go back through the Dow for 100 years and youll see theres nothing new.”

Johnson compares these turbulent times to those people experienced in the 1970s. “We found an article from the 70s that had the same comments you see today, and when you read it youd think it was today.

“This seems like the worst thing weve ever seen right now and for many of us it is pretty substantial. But looking back at history weve always had bumps in the road, theyve just changed over time. They never look as bad when you look back at them,” Johnson says.

“Theyre much more terrifying when youre right in the middle of them. And this too will eventually pass, we just dont know when,” she adds.

“Weve seen phenomenal growth over the past 50 years, even at the bottom of the downturn we see now, its still phenomenal growth,” adds Axley.

“Past performance is indicative of the future, but past performance has had ups and downs. We seem to forget about the fact that there were downs.”

Reproduced from National Underwriter Life & Health/Financial Services Edition, August 5, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.