Everyone is feeling the impact of the market. It almost seems like we are holding our collective breath until this (whatever this is) subsides.
But, what will everything look like when the economic meltdown dust clears?
So asks Jane Bryant Quinn in a Bloomberg article today.
She marks two time periods: Before the Crash (B.C.) and after.
According to Quinn:
At the moment, financial planners report that their clients — young and old — are behaving more conservatively. Families are curbing spending, paying down debt, increasing their savings and investing cautiously. Call this strategy Plan B, the place you retreat to in the face of uncertainty and loss.
So, more investors, retirement investors included, are holding more cash. This, in spite of the fact, that Quinn believes that most 401(k) investors were over-invested in stocks going into the crash.
Odds are that you’ve been over-invested in equities. At the end of 2007, almost one in four workers between the ages of 56 and 65 held more than 90 percent of their 401(k) in stock, according to the Employee Benefit Research Institute in Washington. More than two in five held more than 70 percent in stock. They will be well into Social Security before recovering their losses.
Maybe these 401(k) holders managed their risk by owning a bond portfolio on the side, but I doubt it. More likely, they’re investing aggressively, in hope of making up for the fact that they started serious saving late. They gambled and lost. The market is no respecter of your personal need to make money in a hurry.
Regardless of allocation, Quinn cautions that we’re not through the thicket yet and Plan B, combined with paying down debt and saving more, is probably the right way to proceed for everyone.
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