RESPONDING TO A TURBULENT MARKET

Last week, USA Today put forth an article on protecting yourself during this financial crisis. The question - what do you do now with your money? With so many people losing their head right now and reacting irrationally (shifting investments completely to bonds, ceasing 401(k) contributions, cashing out retirement accounts, etc.), keeping your head can be a challenge. Also, what you should be doing depends on a lot of "personal" factors (your time horizon, your tolerance for risk, your debt situation, etc.). The article outlined 'general' recommendations/ thoughts from some leading financial advisers based upon your age ...

IF YOU'RE IN YOUR 20s...
- Don't panic. You likely have less to lose (have often just begun investing and have a long time to recover from a downturn).
- As you invest, don't ignore your debt.

IF YOU'RE IN YOUR 30s...
- Prioritize retirement savings.
- Don't let fear squander your opportunity to take risk.
- Keep/build an emergency fund (but don't sell stocks to get there).
- Don't hastily temper the storm; make smooth transitions (i.e., make adjustments with new contributions without necessarily selling existing assets).

IF YOU'RE IN YOUR 40s...
- Take advantage of these prime earning years to contribute as much as possible into retirement savings; even if it means cutting back on spending.
- Resist the urge to stop contributing!
- Don't abandon the stock market; people currently stashing money in CDs and money market funds "are committing financial suicide." The 1.18% return on an average money market fund won't even keep up with inflation.
- Stay diversified.

IF YOU'RE IN YOUR 50s...
- Don't do anything rash.
- Keep saving.
- Don't overlook any potential ways to boost savings.
- Make sure you're not paying too much for your investments (i.e., fund 'loads' and expense ratios -- this is solid advice regardless of age, not sure why it is plugged in as specific advice for this age group).
- Keep in mind that you have longer than 15 years to make up losses even if you retire at age 65.

IF YOU'RE 60+...
- Toughest position given the shorter period of time to recover from losses.
- Adjust expectations.
- Consider putting off social security as long as possible; each year you put off the benefit between age 62 and 70 you increase your payment by 8%.
- Cut back on withdrawals if necessary.
- Work part time.
- Consider an immediate, fixed term annuity.
- Invest for comfort - make decisions you can sleep with at night.

While there are distinct differences in the advice provided to the different age groups, there is a definite theme ... keep your head (don't panic/ overreact), spend less, save more, diversify, stick to your financial game plan. Ironically, it sounds like the same advice you should be getting regardless of the economic climate ...

NOTE. USA Today article.