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.
4. Contain your spending urges.
We all have these sudden cravings for fancy gadgets and fancy cars or motorcycles (ladies might veer toward luxury handbags and shoes). Why in the world would you splurge $300 on a GPS for your car if all you do is visit the kids at Christmas time, 50 miles away? Well, it may be a different story if you absolutely require a GPS to get around, but you know what I mean…
5. Go back to school.
Sounds ridiculous, doesn’t it? I have a very good friend who is now 75 years old. Three years ago he undertook a lifelong dream of studying for a master’s degree online. He got it in 16 months and landed a good paying job 2 months later! True story. Now, if McCain can run for president at 72, why can’t you update your knowledge, you young whippersnapper 😉 (at 58 that’s the beginning of a new life)?
6. Stay in the workforce longer. Find work you enjoy.
You don’t want to work forever. Nobody does. But maybe prolonging your stay in the workforce just a little bit has now become necessary. It helps if you choose the kind of job, project or work that is most fulfilling to you, so that it’s easier to keep at it for longer. If you’re working at a job purely because of money, it may be time to consider readjusting your lifestyle to fit your work and income goals rather than the other way around.
Watch Your Health!
A final word of advice; don’t let money matters depress you. There are many agencies that can help you with good advice, whether psychologically or financially. Your most valuable possession is your health. Once you lose it, you have lost everything, no matter how rich you are.