Oct 8, 2008 8:30 pm US/Eastern
Retirement Savings Are Taking Financial Hits
PITTSBURGH (KDKA) ―
The global economic crisis has taken a huge chunk out of Americans' retirement savings.
An estimated $2 trillion has been lost from pension funds in the past 15 months.
Anyone with money in a 401k retirement fund has taken quite a hit these last couple weeks.
The Standard and Poor's is down by a whopping 30 percent for the year and some people have lost at least that much in the market.
The people hurting the most are retirees and those about to retire.
"When the market is good like last October, you think everything is great maybe I can retire early," said 63 year- old Kirk French of Mt. Washington.
French is like most people his age.
Retirement, he says, is now at least another five years off -- exactly the right time for his stock investments to grow back, say local financial planners.
"Now is not the time to get out of the market," said Brian Koble of Hefren Tillotson. "Now is the time to continue to invest in your 401k. Do not suspend your contributions."
"If your time horizon is greater than five years, you should feel very comfortable having equity in your 401k or outside your 401k," said Bob Fragasso of Fragasso Financial Advisors.
In short, if you're not planning to retire before 2014, Koble says just hang in there with the stock market because it will go up again.
But what if you're already retired and your 401k has dropped 20 and 30 percent?
Should you sell the stock portion of your 401k?
"No, they should not do that," said Koble. "This is the wrong time to do that. We have already suffered the decline."
Fragasso says the market will regain its losses perhaps sooner than you think.
But if retirees feel panicked, Koble has some advice.
"We never suggest that investors panic, but if you can't sleep at night and your health is affected by what's going on in the market, there are ways to panic more responsibly," said Koble.
It could be something more responsible like investing in government bonds.
As for retirees who want to sell off the stocks in their 401k right now and buy it back when the market goes up, Koble says that almost never works.
"No one has ever been able to time the market consistently," he said. "What you end doing is hurting yourself in the long term because you end up selling at lows, buying at highs. The average return of someone who tries to time the market over the long run is much lower than return of the market."
In other words, pulling out of the market today thinking you can get back in with enough time to make money just doesn't work for most of us.
One thing financial planners agree on, especially for retirees, make sure your retirement funds are diversified -- some stock, some bonds, some cash in a money market or savings account.
Beyond that, nobody really has any soothing words to say except a little history.
The best year in the stock market, 1933, came right after one of its worst.
(© MMIX, CBS Broadcasting Inc. All Rights Reserved.)
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