Advisers: Retirement Investors Should Stay the Course

The stock market crash that lasted from late 2008 until March 2009 took a big bite out of almost every retirement plan in the country.

But stocks have regained some of their value, though they're still far from the high seen in 2007, and financial planners' advice now, as it was then, is to sit tight.

Few incidents inspire worry like the loss of a nest egg, and for local residents without subprime loans, big dips in housing value or recent unemployment, the market low, and subsequent sinking of their savings, was their only brush with the national recession.

Shelly Newman, CFP, manager of the Commack branch of Edward Jones Financial, said some of her clients needed hand holding, but they all continued to invest through the slump.

"It's very beneficial in hindsight," she said. "Those who stayed in the market did better than those who left the market."

Those who continued socking money away during the lows last year have already reaped some benefits. Newman said 2009 ended up being a good year for retirement plans and values were up substantially over 2008.

The Dow Jones Industrial Average, used by many to track the market as a whole, dropped to about 6,500, its lowest value on record, in March 2009. At that time, the hardest-hit retirement plans were estimated to have lost close to half their value.

But the index rebounded shortly after its plummet and has hovered around 10,000 points since October of last year.

Even so, Michael Kresh, a Commack resident whose firm M.D. Kresh Financial Services is based in Islandia, said people are still nervous.

"The fear of us going into a double-dip recession hasn't gone away," he said. "Unemployment is still a problem and as long as that remains a problem, there's concern that we may have a return to the recession."

Kresh said retirement investors need to be prepared for market volatility for up to another year, and should resist the urge to pull money out of retirement plans or switch to safer investments, such as bonds.

"When people are afraid they look to bonds, but right now government bonds have extremely low rates of return," Kresh said. "Even if you were stretching your investments and taking other risks, over the long-term, your rate of return from bonds would be almost zero after inflation."

Newman said regardless of market conditions, local residents should continue to invest systematically, paycheck after paycheck.

"We don't know if today is the beginning of a new high or if the market will be lower six months from now," she said, adding retirement plans are long-term investments, so most people can afford to ride out the lows.

Even those who have lost jobs during the down economy should continue to bolster retirement plans, Newman said, adding abandoning a company 401(k) for an Individual Retirement Account, a path many ex-workers take, can have some benefits.

"When you have a 401(k) at a company, you can only invest in funds they offer," she said. "In an IRA you can invest in anything, which gives you more opportunities and more diversification."

Kresh said locals should avoid the pitfall of liquidating retirement funds after a layoff. That wipes out any long-term savings and comes with tax and penalty payments that can be avoided, he said.

The local financial planners said residents still need coaching to anticipate and accept market volatility and avoid emotional investing decisions.

"I tell all my clients that sometime in our relationship we're going to have a down market," Newman said. "But that's still a great time to invest."