Comments on: What’s With All These Stories About Retirees and Those About to Retire Losing 50% of Their Investments?

By: Ellie

Ellie — Sun, 04 Jan 2009 06:38:54 +0000

We have our money with a personal finacial planners. We lost too much money and I was told that they had us invested in moderately aggressive b/c of how we filled a form out when signing up with the firm. Why, I ask, in the world while everything was dropping did they not on their own pull us out of moderately agressive funds because of their knowledge that we are 65 – we could not afford to lose as much as we did???? I blame our loss partially on the FP’s for waiting too long and doing nothing until I called them and told them to do so!

By: Mike

Mike — Sun, 04 Jan 2009 05:42:58 +0000

I agree with the gist of your article. What’s also impressed me is the way target retirement funds have been pushed in recent years. People who were looking to retire in a year or two may have been invested in a fund specifically designed for their needs, only to find they’ve lost 25-30% of their assets. This does not speak of greed, but rather of failure to look under the hood or a lack of appreciation of how risky stocks are.

By: Pete

Pete — Mon, 15 Dec 2008 16:26:43 +0000

As you mentioned, I keep hearing these stories about people losing up to 1/2 of their net worth when they were close to retirement, and it just makes me think – wouldn’t you want to be a little bit more conservative when you’re going to be retiring in a year or two?

By: chris

chris — Mon, 15 Dec 2008 05:45:23 +0000

I am one of those people who lost a major part of their portfolio (70% in my case) due to being “overinvested” in stocks. I spent a lot of time looking after my portfolio. I was widely diversified by sector altho primarily in “good conservative dividend paying stocks that have raised dividends for many years”. Much of this loss was in the large banks, IAG, BOA, LYG,BSC among them. Where I made a large (maybe for me fatal) error was in not believing that they could actually loose almost all their value.
In essense I held on thinking things had to get better as many others did. Financial advisors were saying they were now cheap. In some cases I was buying when the drops seemed over and short upswings occurred.This was the “conventional wisdom”. It has of course in hindsight proven not to be valid.
While I could have gone to cash before I was decimated. I did not and that is my “fault”.
I do feel a lot of blame for the seriousness of this current situation rests on the shoulders of a lot of very greedy manipulators who intended to enrich themselves at others expense. For example, were prepared to sell parcels of mortgages that were high risk without any warning to buyers. I also blame so called responsible and conservative (we thought) banks and institutions for not checking into the content of securities they bought and sold. It is really upsetting to see the perpetrators feeling they should get perks and bonuses and enormous benefits. This misery is decimating businesses and truly injuring individuals. Someone pocketed the “good” dollars I paid to purchase these stocks and securities initially before they fell so dramatically in value. I wonder where those dollars actually ended up.

By: Writer's Coin

Writer's Coin — Sun, 14 Dec 2008 00:59:11 +0000

I wholeheartedly agree. You beat me to the punch on writing this because I was also thinking of writing a post very similar to this one.

Why hasn’t this question been answered? I think it has to do with the whole emotional component of the news. They try to get people to feel pity. I guess that’s what sells on the news and makes them out to be compassionate, which shouldn’t be their concern.

But the more important question is, why are they so badly allocated? It’s mostly ignorance, but greed has to be a part of it as well. The same way that people who didn’t need to buy a new home bought one when the market was roaring, they probably decided to put more in stocks to “ride the wave.” Big mistake.

It’s hard to tell people that are near retirement to lie in the bed they’ve made, but it’s hard not to be cold towards people that weren’t paying enough attention to the money they were going to need in retirement. There also needs to be some investigating into advisors that maybe didn’t make this as clear to them as they should’ve.

By: F2O

F2O — Fri, 12 Dec 2008 18:35:10 +0000

This reminded me of a conversation I had with my father at Thanksgiving.
We were talking about the recent election and the economy when he asked how my finances were doing. I told him that things were down, but I keep my allocations pretty much in check, I have 30 years to retirement, blah blah, blah….
He then drops this bomb on me that he has “lost” 45% in the past year. I was totaly caught off guard, since I know he has 70% of his portfolio in cash and bonds. When I pressed him about it, he replied “I’m down 45% in my stock holdings, overall things are only down about 10%.”
My thought is that there are probably more people like this out there than we all think.

By: MaryM

MaryM — Fri, 12 Dec 2008 12:24:56 +0000

The problem for older retirees is the same as with anyone else who wants a retirement that doesn’t involve cat food for dinner: education.

Someone pointed out that older savers didn’t have the tools that younger ones have now, such as financial blogs. They’re instead getting investment advice from places like mainstream media, who have an interest in perpetuating panic and misery as it sells.

Also a factor is a fundamental change in the financial system. I think a lot of people getting near retirement were compelled, by advisors or whomever, to invest their $$ in stocks that paid (@the time) higher dividends that they could get in CDs or bonds. To hedge inflation, they thought they could get a better deal investing in these stocks, many of which are companies that are key players in the current carnage (BofA, Citi, Freddie, Fannie, et. al.). Dividend-paying stocks have been absolutely killed the past few months. If federal funds policies actually made sense, maybe not as many people would have taken the CD $$ that returned almost nothing and bought up these now-worthless assets.

It’s a complex problem. There’s so much going on it would be naive to think that any single individual has complete control over their portfolio and is entirely culpable now. So much is being sold off and every asset class has gone down so much. Hate to say it, but not only do the old rules not apply, there are no new rules to take their place!

By: Bill M.

Bill M. — Fri, 12 Dec 2008 03:59:51 +0000

The biggest problem with people is they invest in 4-5 funds and forget about, never re-allocate, not diversified and most have 40-50% of their 401k on the employer stocks. Scary stuff.

By: anon

anon — Fri, 12 Dec 2008 01:01:58 +0000

They don’t factor in the idea that on the day they retire, they don’t liquidate the entire account and there are still a few decades of growth left on the money that remains in the account.

True. But early drawing down of an account that is primarily stocks can severely degrade the expected lifetime of the fund. Bernstein discusses this in the retirement calculator from hell series. http://bobsfiles.home.att.net/hell/hell.html

By: anon

anon — Fri, 12 Dec 2008 00:57:08 +0000

Almost everyone I know who is retired or is nearing retirement claims to be 100% in stocks. The reasons are diverse – “it worked for my father” and “stocks have done reasonably well for 30 years” and “why incur the capital gains now?” Some have no fixed income option in their 401k. Most have no pension but will collect SS. Many of these folks are smart, smarter than I could hope to be. What gives?

They also have something else in common. None are interested in a balanced portfolio either via target retirement mutual funds or manually balanced. A few do the buy high sell low thing.

Caveat: this is mostly water cooler talk… I take it with a grain of salt, but it makes me worry. You’d almost wish they were in a deferred annuity.