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How Retirees Can Survive the Bear Market

Reorganize your life, not just your portfolio

By Fred Yager
ConsumerAffairs.com

December 12, 2008

Personal Finance • Consumer Prices Edge Up In October • Dodd Bill Addresses 'Too Big To Fail' • Study: Four Types Of Consumers Emerging From Recession • States Worry About Federal Preemption In Consumer Bill • Job Cuts Continue To Fall In October • Consumer Confidence Dips in October, But Rises for Holiday Season • Is The Recession Over? • Economy to Affect Two-Thirds of Families This Holiday • Fed Sees Improvement In US Economy • Consumer Prices Rise Slightly In September • Attorneys General Back Consumer Financial Protection Agency • Gold And Stocks: Are Both Dangerously High? • Study: Americans Crave Better Financial Knowledge • Hiring Begins To Emerge Even As Companies Shed Jobs • Economists Say Worst Of Recession Over • Economy May Force Early Retirements • White-Collar Workers Hit Hard By Recession • Fed Sees Recovering Economy • Six-In-Ten Workers Live Paycheck To Paycheck, Survey Finds • Seven Steps To Saving Money • Survey Suggests Improvement In Jobs Outlook • Stocks Still Outperform, Researchers Claim • Employment Prospects Brighten For Jobless Americans • Job Cuts Rise Following 15-Month Low • Little Sign of Inflation on the Horizon • CFA Applauds Plan to Strengthen Key Investor Protections • Consumers Fall Further Behind On Loans --- • More Personal Finance News

If you're one of the millions of Americans who are in or near retirement, there is a good chance the current bear market has taken a sizable bite out of your investment portfolio. An estimated $2 trillion has been erased from retirement accounts in just the past year.

Key questions for many of you now are: Am I going to able to afford to retire? Do I have to keep working? Will I have to come out of retirement and reenter the workforce to pay the bills?

This past year has impacted just about everyone as the broad market downturn resulted in losses in virtually every sector. No place has been safe in the broken equity market. And while everyone has suffered some losses, investors nearing retirement may be suffering the most.

To see why, let's do a quick comparison. Young investors tend to have smaller accounts so even if they lost value in their portfolios, it's nothing compared to what those who have been investing for decades have lost. People in their 40s and 50s, who may have taken greater hits percentage-wise, still have 15 to 20 years to earn it back before they retire. Then there are those in retirement who already reduced their risk exposure by moving money out of equities into fixed income before the market turned south.

That leaves those nearing retirement. They were still building up retirement nest eggs by keeping their money in stocks just as stock prices were falling off a cliff. They're the ones who have been hit the hardest and may now be forced to put retirement on hold.

If you fall into this category, or are in retirement but didn't reduce your risk, some of you may be in a state of shock over how to survive the tear of the bear, financially, physically, and mentally. Financial experts say the first thing you have to do is change the way you think about your life in terms of your needs and your goals.

The good news: Going back to work or continuing to work may be a positive idea and not just for economic reasons.

Jeri Sedler and Rick Miners, authors of the book, "Don't Retire, Re-Wire," found many retirees were bored, depressed, anxious and restless even before their portfolios got sucked dry. They say that going back to work, especially working at something you enjoy, even if it's only part-time, might be a good solution to your emotional and physical needs as well as your financial concerns.

So while there isn't much you can do right now for your investment portfolio — except to wait for the market to start climbing again — here are a few recommendations about how to reorganize your life so this economic downturn could actually turn into a positive life reversal:

• If you need to replace lost income due to the bear market, rethink how you feel about work. Not all work is drudgery and even work that seems like drudgery may have some positive elements to it such as socialization and feelings of accomplishment.

• Just because you have to keep working doesn't mean you have to keep doing the same old thing. Change fields. Look at what you enjoy doing and target work opportunities in those areas. If you have an avocation or hobby, consider turning it into a vocation or at least pursuing a job that allows you to draw upon those skills. For example, a retired TV producer, who liked to do woodworking in his spare time, came out of retirement and took a job as editor at a woodworking magazine.

• If you want to continue with your current employer, ask your boss if you could stay on, possibly at reduced hours, or with less responsibility or cyclical work that would still bring in some money. Offer to be a floater and fill in for employees on maternity leave or other long-term absences. Or you can work on a project basis — a few months on, a few months off.

• Work can take a variety of forms besides full-time such as part-time, flex time, or job sharing. If you are entrepreneurial, you may even consider starting a business, either something completely from scratch or running a franchise.

• While ageism is a reality, it is against the law. Keep in mind that you are employable, especially if you have skills that are marketable. Certain types of industries, such as retail, if there are job opportunities, they may find older workers to be excellent employees because of their flexibility especially during the high demand seasonal periods.

• If you don't have employable skills, you can always go back to school to learn new ones. For example, IBM has a program that offers $15,000 toward training and time off to employees who want to become math teachers.

• If you need to go back to work, start networking. Talk to everyone you know and ask those individuals to tell those they know about you. Make sure your resume is up-to-date and formatted in the right way. Most people find jobs through people they know more often than through online jobsites. In fact, only three to five percent get a job from an Internet job site.

• Think about volunteering. Not only will serving other people take your mind off your own troubles, you will be extending your network. Volunteers share information and that information could lead to paid work opportunities. A retiree at a museum in New York City, for example, was asked to become a fulltime employee. Another older volunteer who used to be a real estate agent enjoyed her volunteer position so much, she returned to school, got a masters degree in that field, and obtained a fulltime position upon graduating.

The economy will improve eventually, but even market analysts are divided over whether this period will be measured in months or years. In the meantime, take an objective look at where you are financially and emotionally and create a plan to rebalance your life along with your portfolio.

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