Barbara Fradkin – FLORIDA TODAY
Q: My investments keep going down! Should I be worried about my retirement?
A: You are not the only one feeling uneasy. While folks in the beginning or middle of their careers probably aren’t worried, those of us close to retirement (or already retired) are hearing alarm bells. I recently took my concerns to my financial planner. We talked recession, we talked rising interest rates, and we talked core inflation, gas and food prices and a bunch of “what if” scenarios. His advice: don’t make any rash decisions during a downturn. People mess up by taking extreme action when the market goes south.
So what’s the explanation for this insanity? It is not easy and I am still trying to wrap my head around all of the information. In a nutshell…
We are in the claws of a bear market.
No, not the yummy kind of bear claw from the bakery. The term “bear market” is used by Wall Street when an index like the S&P, the Dow Jones Industrial Average (or even an individual stock), has fallen 20% or more from a recent high –for a sustained period of time. Inflation is causing the Federal Reserve to raise interest rates to an amount not yet determined. With rising rates there is a fear/danger of an economic recession. Equities and bonds are going down due to rising interest rates.
Experts will tell you that it is critically important to properly allocate your portfolio in a way that matches your risk tolerance. If you are no longer working and /or retired, know where in your portfolio you will take cash for income to support yourself. You remember the saying, “Don’t put your eggs in one basket?” This is definitely true with your investments. You should have three separate “baskets” once you retire.
A Tale of Three Baskets.
Basket One: This should contain 12-24 months’ worth of cash requirements, based on personal estimates. This should include not only monthly draws but potential cash requirements for vacations or large purchases (cars, houses, etc.).
Basket Two: Funds needed for another 12-24 months. This money ideally would be invested in short duration bonds.
Basket Three: Equity/bond investments based on personal risk tolerance.
Hey, I am not an expert (although I’m channeling one for this column). Join me at One Senior Place in Viera, 8085 Spyglass Hill Road, on Wednesday, September 14th at 5:30 PM, when our special guest will be Kenneth A. Whittaker of Raymond James Financial. He IS an expert and will talk about this topic. Bring your questions so you can sleep better afterwards. You can RSVP online or by calling 321-751-6771.
One Senior Place is a marketplace for resources and provider of information, advice, care and on-site services for seniors and their families. Questions for this column are answered by professionals in nursing, social work, care management and in-home care. Send questions to askOSP@OneSeniorPlace.com, call 321-751-6771 or visit One Senior Place, The Experts in Aging.
Barbara Fradkin is a Social Worker and a Certified Care Manager for One Senior Place in Viera.