The recession has perhaps hit retirees the worst as they were forced to sit back and watch their life savings dissolve right before their eyes without being able to do anything about it.
The typical problems faced by retirees- decreased mobility, more likelihood of debilities and many others are hugely exacerbated when an additional stress factor is added to the mix – that of worrying if there is enough money left to handle basic needs such as being able to attend to emergencies. These anxieties can be taken care of to a large extent by tweaking the retirement savings plan during the earning years.
The 2008 – 2009 period showed how investment planning could give a deceptive idea of security for the future. For those nearing retirement as well as the retirees, the erosion of their investment fund was their worst nightmare multiplied by 10. While declining interest rates and asset values are not a cause of celebration for anyone, it is the retirees who are hit worst because they have no means of recouping losses through future earnings. This also means that retirees cannot afford to expose themselves to the same risks that employed investors can.
Investing for retirement can become a whole lot safer and dependable if one can foretell what the markets are going to be like in the future. Since this is not possible it is necessary to make sure to consider the worst case scenario and be prepared for it.
Target date funds are the outcome of such thinking. These mutual funds assist retirees in achieving a set goal of returns within a specific date- retirement, for instance. The closer the investor is to retirement the higher the percentage of investment in high yield stocks. Of course, the high yield stocks are also high risk propositions. But since the goal of meeting the returns target is feasible only with such a strategy, the risk needs to undertaken. There are many older employees who are opting for these plans.
The age old rule about not putting all your eggs in one basket still applies in the investment world. Spreading your investment over sectors which grow or dip independent of each other is a good strategy to ensure that the decline in one segment is balanced out by gains in another. Even in times of recession, not all segments of the economy are affected to the same degree by the downturn and diversifying your portfolio after careful study of previous recessive trends can help you cover your bases in your retirement egg nest.