This refrain is ubiquitous among the older set when investments are sinking. And why not? The fear is that it will take so long for the market to recover that the hapless retiree will run out of money along the way. But isn’t the alternative – letting the money languish in safe investments that have scant real return potential – just as risky? It is usually risky whenever you view a dilemma as requiring an “either/or” resolution. In this context, the investor either settles for the safe choice and the money relentlessly loses ground to inflation or continues to invest in securities that have been losing value with no promise that the losses will stop, much less reverse. As is usually the case with such quandaries, there is a middle ground. Investors can earmark a portion of the money to safer investments while continuing to give the rest a chance to grow. Take advantage of your advanced years by recalling that all bear markets end, and the subsequent recovery is both robust and fast. You don’t want to get caught midway through a recovery with most of your money on the sidelines.
Smart Money Tips
- Raise deductibles to make your insurance more affordable. Insurance is expensive albeit essential, but you can make it more affordable by raising the deductibles, in other words, by being willing to pay more in the event you suffer a loss. The insurance industry isn’t always very good at letting policyholders know about higher deductible coverage, so you’ll need to take the initiative. But if you can afford higher deductibles, particularly auto and homeowners or renters’ insurance, by all means check out the savings.
- Are you sure your beneficiary designations are up to date? Many people unwittingly think those whom they have designated as beneficiaries, executors, etc. are okay when they are not. Some changes, like divorce or the death of a spouse, are obvious triggers of required document changes, although it’s surprising how many forget to make the needed changes. Other changes are subtler, but nevertheless require revisiting retirement plans and estate planning documents. For example, someone may have designated all children to inherit equal shares of the estate but wants to disinherit one child who has since become estranged from the family. In addition to the will, other documents where the child is named, e.g., a life insurance policy, may also need to be revised. Another often-overlooked triggering event is a name change, for example, the marriage or divorce or remarriage of a daughter. While the name change may not cause undue problems in the future, revising certain documents, e.g., the health care proxy and power of attorney, to reflect the new name may avoid a delay later.
Food for Thought
Bull markets are born in pessimism, grow on skepticism, mature on optimism, and die of euphoria.
-Sir John Templeton
Money Can Be Funny
Anyone who lives within their means suffers from a lack of imagination.
Word of the Week
hebetudinous (heb-i-TOOD-n-uhs) – Dull or lethargic, especially relating to the mind.
Origin: From Latin hebes (dull)
He sat in front of the TV in a kind of hebetudinous fixation, perhaps mesmerized by the dunderheads hosting cable programs.