Seniors Squeezed Hard As Retirement Funds Tumble

12/10/2008

posted by N. Sioris

Stumble It!

Have the bleak economy and the decimation of the US stock market taken their toll on your fiscal and mental health? If so, don't feel alone. Many retirees are feeling the "senior squeeze." We are being assaulted from almost every angle, whether it be rising prices, lower home values, lost stock market assets, lost dividend income, you name it, we are hard pressed to find a bright spot. Consequently, most of us are resorting to the "hunker down" position, and simply holding our breath and trying to preserve whatever we have left.

Some folks that are all ready in retirement are wondering if they will have to re-enter the work force. Good luck with that though, since the most recent data released on December 9th, from the Conference Board's Employment Trends Index says that 1.9 million jobs were lost in the past year. The index also suggests that job losses could exceed 3 million by mid-2009.

Others, that are on the verge of retiring are now considering the possibilty of postponing retirement. Particularly hard hit were those that were planning on retiring in the next year or two, but had not properly allocated their 401-K's or other retirement portfolios. If too much weight was still in the equity markets and not enough in bonds or fixed income investments, much of that wealth evaporated recently, and at lightning speed. A recent study conducted by Braun
Research for Bank of America cited that 43 percent of Americans now believe that in light of the recent economic turbulence, they now face more years in the work force than they had anticipated a year ago.


Proper Asset Allocation Should Be The Lesson Of The Day

Over the weekend, Jack Bogle, founder of Vanguard Group, was interviewed on the television show Wall Street Journal Report, by Maria Bartiromo. He discussed what went wrong on Wall Street and what an investor can do to protect their assets at this juncture and into the future. Although he admits that these are "scary times, that try men's soles (and women's soles too") but he says stay diversified and use proper asset allocation. One of the rules of thumb that he mentioned is that your bond position should roughly be equal to your age. He said be an investor not a speculator and keep your costs low. The complete interview can be viewed here. It's definitely worth your time.

Most folks all ready in retirement based their retirement budgets on an income stream that they felt would be reliable well into the future. The State Department estimated that $2 Trillion Dollars have been lost in the capital markets. No one expected retirement funds to tumble to the degree or with the speed that they have during this current crisis. Liquidating assets at this time would fly in the face of another age old investment rule, which is, to buy low sell high.

But what if you are hurting for supplemental income to make ends meet? Do you go ahead and sell into this market? Most of the smart people would say; "only as a last resort." So what to do? If you have equity in your home, you may want to consider tapping into that, rather than liquidating investments in this environment.

A reverse mortgage, that requires no re-payment as long as you live in your home, might be a solution worth considering. Even if you are one of those people who never thought you would access home equity in this fashion before, you may decide that once you weigh a reverse mortgage loan against your other options, a reverse mortgage may turn out to be a cost effective choice, given the current market conditions.

If you are interested in learning more about a reverse mortgage or would like to receive a detailed benefit summary, please request a personalized reverse mortgage quote here.