Fri Oct 10th, 2008 at 08:09:25 AM EST
I've been thinking about my parents more and more over the last few weeks and especially the last several days, but when I read this headline and these paragraphs in the International Herald Tribune yesterday --
The week that dashed baby boomers' dreams
Of all those who watched the swooning graphs of the marketplace describe the parabola of their fortune's decline, perhaps the legions of the baby-boom generation were the most rueful, the least likely to believe they had time to recover, the most likely to ponder the validity of the promise after the Great Depression and World War II that things would only get better. ...
But that assumption began to look questionable - to say the very least - as the crisis began to spill its toxins from the arcane mysteries of high finance into ordinary people's pocketbooks.
By depending so much on stock-based savings, the baby boomers were exposed to the prospect of their golden years being straitened or even canceled: paradise deferred indefinitely.
-- I said, "That's it. I need to start getting some serious advice and information about what they should be doing with their savings, because things are starting to look more than ugly; they're starting to look scary."
Two days ago, the New York Times had an article titled "Switching to Cash May Feel Safe, but Risks Remain" which said:
... some retirees, or those close to leaving the work force, may be well-off enough to leave stocks behind for now. If the tumult in the economy and the decline in the markets have altered your risk tolerance, then it may make sense to move to a portfolio of Treasury bills, certificates of deposit and money market funds.
On the other hand,
If you can't afford to live off the proceeds of cash investments (or dividends from your investment in your kids' pizza joints), you may have no choice but to hold on to whatever stocks you have left. Then, you can hope for a rebound that will allow you to live out your later years more comfortably. Selling now and moving to cash could mean guaranteeing a lower standard of living for the rest of your life, because you'd be locking in your losses.
My parents are 67 and 65, and they plan to retire in the next two to three years. I am praying that their financial advisor has already moved their savings into money market funds and CDs. If so, I think they have enough saved up to live off in their retirement. But I am worried: while their financial manager is a very well meaning and nice guy, during the 90's tech boom he kept their 401k's in aggressive mutual funds until it was too late, and these lost an infuriating amount of their value by the time it was all over.
When I talk to them this weekend, would I be a Serious People if I told them to make sure that all their savings were in ultra-"safe" holdings like money market funds and CDs? Are there any other factors I should consider?
And cranking up the paranoia another notch up: How about for friends who are still in their late twenties and thirties, who are just starting (sometimes rather large) families? Not that any of them are coming to me for financial advice (no one could be that foolish), but talking, emailing and chatting with them, I get the feeling that the great majority of them are completely unaware that the crisis may very well roll up onto their front lawns and into their homes in the coming days and weeks. And I want to ask them, "Are you guys buckling up for the ride?"
But then I ask myself, am I the one who is overreacting?