Boomers who prepared well, stayed the course are fairing better

Fear and greed are never a good financial plan, especially when retirement is on the horizon.

“Investors should evaluate their current situation on where they are, where they want to be, and when they want to be there,” said Josh Miller, President of Colorado Financial Management. “Once that is done they can work with an advisor or by themselves to establish a plan to accomplish their goals.”

But setting retirement goals can be tough, especially for people who lost significant wealth during the economic downturn in 2008. Miller’s clients who managed to keep fear at bay and ride out the great recession without any major changes to their financial plans fared well.

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“Clients who held steady and did not get too conservative during the downturn in the markets and economy have performed better than those who went to 100 percent cash and bonds,” said Miller. “Some liquidation of assets may have been a good thing during 2008, but better performance has been achieved by those who did not entirely eliminate their equity allocations.”

Riding the boom and bust cycle of the housing market was also critical to protecting an asset thought to be a cornerstone of most retirement plans – one’s home. A number of people pulled money out of their homes through refinancing packages. In the process, they’ve lowered the equity in their homes.

As the housing market rebounds those investments should improve.

Indeed, the outlook isn’t hopeless for people with smaller nest eggs, or in some cases, no nest egg at all.

“It is never too late to save money for retirement. Half the battle is just to begin putting money away. Once you have started the process consistently, you have begun dollar cost averaging into the markets. You are investing in both good and bad markets and are lowering your overall cost of your investments,” said Miller.

Some of Miller’s clients have delayed retirement or gone back to work to better prepare for their golden years. Others have put off high dollar expenses, like vacation homes and high-end vacations. They’ve also taken some of the following steps.

1. Delayed retirement distributions to allow portfolios to recover from losses

2. Lowered their existing distributions

3. Reduced debt levels, especially revolving debt like credit cards or home equity lines of credit

4. Watched TV less to avoid some of the doom and gloom reports which made them nervous.

“Those investors who fear the market typically do not have a solid understanding of the long-term performance of markets or understanding of options to reduce market volatility and enhance performance. Investors should first educate themselves on the markets and hopefully lower fears,” said Miller.

Miller has also noticed that his clients have returned to the basics, meaning investing in things they can understand, learning the importance of patience in retirement planning, and having balanced portfolios.

His clients have also “relearned” the negatives of greed and chasing returns.

“Investors should evaluate their current situation on where they are, where they want to be, and when they want to be there. Once that is done they can work with an advisor or by themselves to establish a plan to accomplish their goals.”