Tuesday, June 22, 2010

"Roadblocks to Financial Security" Fear is my biggest challenge

Checking in on my 401(k) nest egg always makes me nervous. It's been that way for nearly three years since my retirement investment funds tanked along with the global economy and I looked at a birthday cake with 60 candles on top. Still substantially below its value peak from September 2007, the nest egg remains in four mutual funds with my former employer. I have yet to dig into what I will do with this money as I approach full retirement age in a couple of years at 66. So when I visit to my financial future by going online to look at the 401(k) nest egg, I always get a bit queasy. Fear, as it turns out, is among the key roadblocks to financial security for Americans, according to a new survey by Harris Interactive research firm.
Fear ranks up there with the No. 1 roadblock, living beyond our means, and No. 2, not saving enough. Fear, manifested as inaction, keeps us from taking charge of our financial lives. Hey, I admit to some of that. But I've heard for years that you're supposed to buy and hold, wait out the downturns and not try to second guess markets. I am now reconsidering that philosophy because of my own negative experiences that include holding on to a stock mutual fund for 20 years that produced a measly 2 percent in annual earnings over what I was putting into the fund. Another negative experience? Buying Citigroup shares eight years ago at $50 a share only to see them languish for four years then tank to $4 a share with the financial meltdown. Never mind those tech stocks that have done nothing. Then there's my lack of trust in fund managers and those who sell investments, diminished by the bad press related to the lying and stealing that has gone on at some of our most respected institutions. So I guess it's not just fear, but lack of trust that has me high-centered with my investment portfolio.
Advice from advisors
Commissioned by Principal Financial Group, the Harris survey of 650 financial advisors nationwide including independent broker/dealers, wirehouse and regional brokerage firms asked advisors what they are telling clients to "rebuild their financial well-being?" Their answers:
- Pay down debt.
- Increase emergency fund savings.
- Spend less money.
- And talk to their financial advisor more often. (No surprise there.)
Advising clients to learn to live within their means is among the strong messages coming out of the investment community, said the report. Now that the initial shock of the meltdown is past, advisors say clients are ready to "take action" to rebuild their financial well-being. People want information, they want answers and they want to diversify their investments and lessen risk. Guess what...all that takes energy and time. When you're working full-time, managing a family, paying day-to-day bills, it's very difficult to put time into long-term research. I know because I took an early retirement package from work so I that could concentrate on getting to real retirement. Time pressure for both financial advisors and their clients (like me) is a challenge, said the report.
Trusting my judgment
My problem also includes trusting my own judgment. My experiences of the past six months haven't done anything to increase my self-confidence. For example, late in 2009 the "experts" in the Wall Street Journal and other global investment publications were predicting that the Asian and European economies would recover from the Great Recession at a faster pace than the U.S. economy. Based on that broad consensus, I moved a larger percentage of my 401(k) money in to international investment funds. Big mistake. Both of those funds have lost 10 percent of their value in the past six months. The U.S. fund is down 8 percent with my bond fund up a couple of points. In hindsight, I should have left things as they were or moved more money into bonds. Now I'm stuck, hoping that world markets and economies recover. But thanks to the Greeks that may not happen any time soon. None of this will keep me from investigating new options for my nest egg...which I'm beginning to do. There are plenty of financial advisors out there ready to help. Sounds like I need to build a spread sheet comparing options versus risk.
To learn more about the Principal Group"s AmericaRebuilds program, click here.
To use a Retirement Planning Calculator at Principal.com, click here.

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