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Ten Ways to Get Off the Investment Roller-Coaster
By Robert A. Sagar
ROCKVILLE CENTRE, N.Y. - Remember your first ride on an amusement park roller-coaster? I will never forget mine. The painfully slow climb, the anxiety-building wait at the top and the inevitable terrifying plunge into the abyss. The exhilarating speed and the unexpected turns that flung me headlong into that black tunnel of unknown length was the worst part. The rushing highs and lows, the fun, the fear and the panic, all of these emotions are all created by a complex structure under the control of someone else. A roller-coaster operator sees you as merely a passenger. Similar to how a stock broker sees you as a source of revenue.
Today's stock market is a lot like that roller-coaster ride, the same ups and downs, the same terror. The difference is the stock market ride never ends and the stakes are far greater. Many seniors have lost 10 to 50 percent of their retirement savings in the stock market during the past few years. In the aftermath of September 11th, many took a swift ride they'll never forget and for some, may never recover from. We all remember the Fed's eleven interest rate cuts in 2002, which reduced some senior's incomes by as much as 90 percent. Interest rates on savings and CD accounts have never been lower.
The good news is it's possible to get off that financial roller-coaster and enjoy the peace of mind that comes from stepping back onto solid financial ground. It's not difficult and it's a lot less risky than staying in the "you never know" stock market game. Here are my ten simple steps for getting off that roller-coaster quickly and regaining control of your financial future:
- Assess your situation. What are your assets? Gather all your financial documents including: your stock certificates, bank statements, brokerage statements, tax returns, social security information, insurance statements and information on all other assets you may have. Look at them collectively and re-acquaint yourself with your portfolio. Make a list of each asset.
- Evaluate your investments. Review and determine the true rate of return on each investment in your portfolio. On your list, rate the return for each asset as high, medium or low.
- Determine your state of risk. Review how risky your investments are. What percentage of your overall savings is in "safe money" investments and what percentage is at risk? On your list, rate the risk factor for each asset as high, medium or low.
- Review your needs. Are you already retired, close to it or far away? Do you have sufficient monthly income? Have you estimated what it needs to be? Consider the pros and cons of each investment on your list. Are your investments in line with your financial needs and objectives? Rate each asset as yes or no.
- Investigate alternatives. Investigate other investments that would better support your financial goals and provide the security you need. If your portfolio over-emphasizes high risk investments, consider balancing it with "safe money" alternatives, such as fixed annuities.
- Reallocate. If you find better options, then act. Don't be afraid to make adjustments or modifications to your portfolio. Remember, it's your money.
- Establish or update your estate plan. If you have an estate plan, review and update it. If you don't, then evaluate your need for one. Anyone with any assets should protect them through an estate plan. Don't put this off!
- Activate your estate plan. Ensure you have the proper estate planning tools in place and utilize them. Your assets should be protected from probate taxes, estate taxes and other taxes that can reduce their value.
- Remain "savvy" and avoid scams. The fact is that financial scammers are everywhere. Unfortunately, they particularly prey on seniors. Remember the following points whenever approached: Reputable financial firms don't solicit you about moving your money. Companies should always have available references. Banks don't send representatives door-to-door. Credible financial professionals have no vested interest in a particular product. And if it sounds too good to be true -- IT IS!
- Check in regularly with a financial advisor you trust. Review your portfolio with your financial advisor at least once or twice a year. There are some worthy investments out there, and you don't want to be the last one to hear about them!
The worse move seniors can make is to wait. The stock market roller-coaster is unpredictable. Yes, it will go up and come down, but no one knows when. If you're like most seniors, you don't have the time or money to make that gamble. Retirement is about peace of mind and spending time with friends and family. Besides, the only roller-coasters you should be on are the ones at Disneyland.
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