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Financial tips for turbulent times
McLEAN, Va. (11/5/08)--Whether you’re an older worker with seemingly few options to recoup significant investment losses, or a younger worker with minimal or no investment savings at all, don’t let the financial crisis scare you into not taking any action at all. Now is the time to take stock of your situation, learn from others’ mistakes and formulate a plan to tough out turbulent times (USA TODAY Oct. 31). Heavy investment losses are disproportionately affecting baby boomers, the oldest of whom turn 62 this year. Although there’s less time for you to recoup losses, that’s not a reason to pull all your money out of the stock market (Moneycentral.msn.com Oct. 17). Even if you’re already in your sixties, to have enough cash to fund 25 years to 35 years of retirement requires a long-term plan. Most important, don’t panic. Regardless of your age, start with the basics and vow to stick with your plan:
* Rebalance your portfolio. Do your investment choices reflect your risk tolerance and investment strategy? * Keep some liquidity. Consider stashing some cash--three to six months’ of living expenses--in a money market account at the credit union, which is insured to at least $250,000 by the National Credit Union Administration at credit unions having federal share insurance. * Increase your contributions. Most stock prices are at low, bargain-basement levels. If possible, bump up your contribution. * Diversify. Don’t put all your investment eggs in one basket. Spread your wealth among a variety of investments: domestic, international, financial services, technology, health care, and so on. * Use dollar-cost averaging. By having, say, $50 each paycheck automatically directed to a mutual fund, your contributions will purchase more shares when the price is low, and fewer shares when the price is high. * Pay down debt. Reduce the choke-hold that credit cards have on your budget. Pay off the highest interest-rate card first, and then apply that payment to the next-highest interest-rate card. Stop charging. * Spend less. Identify needs versus wants, and then set priorities. You’ll be surprised how many needs that you’ve identified are actually wants in disguise. * Work longer. If you’re close to retirement, consider hanging on to your current job longer than planned, if you can. Or, secure part-time work after retirement. This reduces the number of years you’ll dip into savings, and helps build additional savings.
For more information, read “Key to Investing in Recession: Stay Calm” in Plan It: Retire Ready Toolkit.
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