Investing

Are you one of the seniors or those over 55 who’s retirement investments have been hit during this economic crisis?

If your investments have taken a severe beating lately and you are over 55 years of age, you may be considering the possibility of selling all your stocks, including your 401K funds to cut your losses. This would be a terrible mistake, unless it’s a dire emergency, in which case you would do it anyway, crisis or no crisis.

Was your retirement just around the corner and were you already savoring the dolce far niente, which in plain Italian-English means the pleasure of doing nothing? Suddenly, with this recession, the dark clouds on the horizon have become a full-fledged hurricane, wiping out your precious possessions. What should a quasi senior citizen do in such circumstances?

Image by MSNBC.

Retirement Investments Hit? Financial Options For Seniors

1. Weigh the possibility of a reverse mortgage.

Check out this comment made on Yahoo Shine:
“The older a borrower, the larger the percentage of the home’s value that can be borrowed. Homeowners can receive payments in a lump sum, on a monthly basis (for a fixed term or for as long as they live in the home), or on an occasional basis as a line of credit. Homeowners whose circumstances change can restructure their payment options.”

In other words, people 55 and over may have the option to select a reverse mortgage, which in effect is like selling your home while you keep living in it. There are of course several conditions that must be met, which you can read about here. Just remember to study this option very carefully before signing on the dotted line.

2. Reduce your expenses immediately.

You may have already read about the many ways a family or a couple can lower utility bills and payments by as much as 20%. Ditto for fuel (it’s going up again, you can be sure of that), groceries (buy generic brands), car payments (pick a car you can afford and sell the extra one), insurance coverage payments (play the companies against each other and choose the cheapest one). Find ways to reduce your expenditures — take a look at your existing debt and see if you can work to minimize it. Perhaps you can call your credit card companies and tell them you have an offer to transfer your debt at a much lower rate. The key is to review your family budget and see where you can comfortably make cuts. Then do another pass and see what you can do without, for the meantime.

3. Keep your investments. Adjust your asset allocation with care.

If you’ve invested in solid companies, such as blue chips, then stay with them. They should be worth much more down the road. Once you are satisfied that their values have somewhat recovered, consider changing the percentage you dedicate to stocks and the percentage you allocate to more secure investments, such that your asset allocation is optimized for your age, risk profile and financial goals. At your age, consider reversing the typical 70%/30% allocation formula; that is, go with something more like 70% safe (cash and bonds) and 30% risky (stocks, real estate). If you already maintain a decent allocation, then rebalance your positions accordingly.

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Another day, another financial institution in the dumps. Here’s how to protect yourself against the economic crisis.

Photo from demian

Some so called Wall Street experts and doomsayers are announcing a major financial meltdown on Wall Street which could engulf not only the U.S., but also the rest of the capitalistic world. While a crisis is quite obvious, remember that this is not 1929; there are multiple layers of protection for the small guy like you and me.

What can we — the small investors, the good guys — do to protect ourselves? Unfortunately, I learned the hard way in 1987, when the stock market crashed in various countries. My whole capital was wiped out in one day, now called Black Monday. It wasn’t much by George Soros standards, but to me it was a catastrophe.

Steps To Survive This Economic Crisis

1. Buy low.

Fortunately, my wife had kept a little reserve behind my back and I saw a great opportunity to get some money back from the market, no less. Call me dumb or foolish or both, but when the stocks, even the blue chips, were at their lowest, I chose a superior company and invested every penny in its stock. I knew, gut feeling if you wish, that at that time, the stock price did not truly represent the value of an excellent company. A year later, I sold it at 12 times the amount I had paid.

If you don’t want to take the same risk, please remember that the big financial sharks are delighted to see a crisis; that’s when they pounce to snap up incredible bargains. So why shouldn’t you? In retrospect, it would have been more prudent to do some asset allocation, but I took a risk and won. My gains aside, it’s best we manage our risks in a volatile market by keeping diversified even as we buy during the dips.

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