Remember your first ride on an amusement park roller coaster? I
will never forget mine. The painfully slow climb, the
anxiety-building wait at the top and the inevitable terrifying
plunge into the abyss. The exhilarating speed and the unexpected
turns that flung me headlong into that black tunnel of unknown
length was the worst part. The rushing highs and lows, the fun, the
fear and the panic, all of these emotions are all created by a
complex structure under the control of someone else.
By Eric Heckman
Remember your first ride on an amusement park roller coaster? I will never forget mine. The painfully slow climb, the anxiety-building wait at the top and the inevitable terrifying plunge into the abyss. The exhilarating speed and the unexpected turns that flung me headlong into that black tunnel of unknown length was the worst part. The rushing highs and lows, the fun, the fear and the panic, all of these emotions are all created by a complex structure under the control of someone else.
Today’s stock market is a lot like that roller coaster ride, the same ups and downs, the same terror. The difference is the stock market ride never ends and the stakes are far greater. Many retirees have lost a portion of their retirement savings in the stock market during the past few years. In the aftermath of Sept. 11, many took a swift ride they’ll never forget and for some, may never recover from. We all remember the Fed’s eleven interest rate cuts in 2002, which reduced some retiree’s incomes by as much as 90 percent. Interest rates on savings and CD accounts have never been lower.
The good news is it’s possible to get off that financial roller coaster and enjoy the confidence that comes from stepping back onto solid financial ground. It’s not difficult and it’s a lot less risky than staying in the “you never know” stock market game. Here are 10 simple steps for getting off that roller coaster quickly and regaining control:
1. Assess your situation. What are your assets? Gather all your financial documents including: your stock certificates, bank statements, brokerage statements, tax returns, social security information and insurance statements and documentation on all other assets you may have. Make a list of each asset.
2. Evaluate your investments. Review and determine the true rate of return on each investment in your portfolio. Rate the return for each asset as high, medium or low.
3. Determine your state of risk. Review how risky your investments are. What percentage of your overall savings is in conservative investments and what percentage is at risk? Rate the risk factor for each asset as high, medium or low.
4. Review your needs. Are you already retired, close to it or far away? Do you have sufficient monthly income? Rate each asset as yes or no.
5. Investigate other investments that would better support your goals and help provide the security you need. If your portfolio over-emphasizes high risk investments, consider balancing it with conservative alternatives.
6. Reallocate. If you find better options, then act. Don’t be afraid to make adjustments.
7. Establish or update your estate plan. If you have a plan, review and update it. If you don’t, then evaluate your need for one. Anyone with any assets should protect them through an estate plan.
8. Activate your estate plan. Ensure you have the proper estate planning tools in place and utilize them. Your assets should be protected from probate taxes, estate taxes and other taxes that can reduce their value.
9. Remain “savvy” and avoid scams. The fact is financial scammers are everywhere. Remember the following points whenever approached: Reputable financial firms don’t solicit you. Companies should always have available references. Banks don’t send representatives door-to-door. Credible financial professionals have no vested interest in a particular product. And if it sounds too good to be true – it is!
10. Check in regularly with a financial advisor you trust.
The worst move you can make is to wait. The stock market rollercoaster is unpredictable. Yes, it will go up and come down, but no one knows when. If you’re like most retirees, you don’t have the time or money to make that gamble. Retirement is about enjoying life. Besides, the only roller coasters you should be on are the ones at Disneyland.
Eric Heckman is president of Heckman Financial & Ins. Services, Inc. Eric is a CFP®, ChFC, CLU brings a wealth of knowledge and over 13 years of experience to the field of financial planning You can contact Eric at www.WealthCreator.com or 297-9800.
