How low will it go ?: Dow plummets 675 points, frustrating investors

Oct 10, 2008 (Northwest Florida Daily News - McClatchy-Tribune Information Services via COMTEX) -- TGT | Quote | Chart | News | PowerRating -- Stephen Baldwin is 46 years old, the single father of a 19-year-old college student, and his 401(k) is tanking.

Baldwin, who lives in Fort Walton Beach, is angry.

But he is in better shape than some investors.

"I'm told to leave it alone, let it grow," Baldwin says of his investment accounts.

He's been contributing to them even as their values have plummeted; luckily, his daughter's education is paid for by a combination of scholarships and the Florida Prepaid College Plan.

For those close to retirement, the downturn is especially frustrating.

There's the 64-year-old construction worker who made the "forced decision" to retire -- actually, to begin collecting unemployment -- this month as local jobs dried up. One of his last jobs was at Beach Community Bank in Navarre. Meanwhile, his IRA dropped 45 percent in the last month. He declined to give his name.

"All of these things hit at once," he says. "You take a hit on your savings, a hit on employment. ... It was so inevitable. It was so obvious."

Some people have started using the term 201(k), but not many folks find humor in the fact that 401(k) losses have hit $2 trillion in the past 15 months.

Even before a second straight day of harrowing plunges on Wall Street, local stock advisers had started having conversations with clients about the alarming events.

Recently the American Association of Retired Persons published survey results that found 13 percent of Americans 45 and older are tapping into their retirement accounts, or other investments, to cover day-today expenses. It also found that 20 percent stopped contributing to retirement accounts during the past 12 months.

"I've had a lot of calls coming in and a lot going out," said Matt Ritter, who runs an Edward Jones agency in Mary Esther. "For the last couple days, the last couple weeks really, I've been trying to assure folks we still feel very strongly about staying invested and not trying to time the market."

Still, Ritter said, there have been a few investors who have decided it's time to get out.

"I tell people, 'If you can't sleep at night, do what you have to do,' and they have the ultimate authority," he said.

For those with mutual funds, going to Treasury bonds is often a popular option, he added, because there are no fees associated with changing to them or with changing back to mutual funds.

"It's been a tough year, an ugly year, but it's not going to go to zero," Ritter summarized. "It's going to come back."

Mike Talley of Talley Financial in Destin said, "Most of my clients are staying the course." Only one of his clients did some selling, choosing to offload 10 percent of his stock.

"Yes people are nervous, people want to know if they'll be able to retire," Talley said. "But the problem is many people are self-directed and they go with what they've seen in a magazine or have seen on TV, without any structure or discipline to it. Then when the market goes into decline, they lose more than they're comfortable with."

One of the key issues would have to be age, Talley said.

"If you've got only three to five years left before you want to retire, maybe it's prudent to have 20 to 30 percent of your investments in stocks, with the rest in something fixed like bonds or CDs or money market accounts," he said.

One investment gaining in popularity, Talley added, is the variable annuity issued by insurance companies. Because the investor pays extra money for a "rider," the company is able to pledge a certain level of income for life. But that's providing the insurance company stays in business that long.

Still, American finance has entered uncharted territory with the recent federal bailouts, and the news Thursday that the government may be getting more involved with troubled banks.

"I don't think we've had banking crisis like this in our history, and now it's gone global," Talley said. "If I was a betting man I would bet there's more upside potential than downside. As far as the economy goes, there are still people shopping at Walmart and Target. They're still buying gas.

"Is it time to adjust or talk to somebody who's a professional? Sure," he said. "But it doesn't mean go out and sell everything first and then try to figure it out later."

To see more of the Northwest Florida Daily News or to subscribe to the newspaper, go to http://www.nwfdailynews.com. Copyright (c) 2008, Northwest Florida Daily News, Fort Walton Beach Distributed by McClatchy-Tribune Information Services. For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.

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