Advisers try to quell fears

By JOAN D. LaGUARDIA, jlaguardia@news-press.com

Last year at this time, Dianne and George Papaioannou felt comfortable that their investments would pay for a long and pleasurable retirement.

This year, like other new or soon-to-be retirees, they face worrisome prospects as falling stock values reduce the worth of their retirement plans.

“We had a comfortable nest egg, and we budgeted out a comfortable living for the next 30 years. Maybe now we can’t live as long,” quipped George Papaioannou, 58, who retired two years ago to Fort Myers Beach.

Investors forced by timing to make immediate decisions are posing tough questions to Southwest Florida’s financial advisers. The answers depend on the investor’s immediate need for cash, their portfolio diversification and their tolerance for risk. A panic move out of stocks could be as dangerous as overloading a portfolio with risky stocks, they warn.

“There is no good general advice. You have to look at an individual situation,” said Ed Bell, a financial planner with Cornerstone Financial Services, Fort Myers.

Those who have immediate need for cash will be in the worst position.

“If they need to begin to use these dollars to live on, I would liquidate enough to cover their needs for the next 12 months,” said Diahann W. Lassus of Lassus Wherley & Associates, which has a Naples office.

“The key in this market is not to make quick decisions. Give yourself time to ease in or out of the market, but always make sure you have cash available to meet your needs for at least six to 12 months,” said Lassus, a certified financial planner™ practitioner and certified public accountant.

“Most individuals who are looking to retire still have the option of leaving their 401(k) in place at the company they are retiring from ... rather than selling the investments and immediately rolling them out to an IRA,” she said. “This can allow them to ride out the current market until it stabilizes.”

Bell said 401(k) investors who do choose to roll into an IRA can take that opportunity to diversify.

“When you are talking roll-over, you are not talking about a taxable event. More of your assets should be in safe investments. You shouldn’t be so aggressive. A 30-year-old can afford to be heavily invested in the technology sector. If you are 60 to 65, you should be in blue chip stocks and even some fixed-income assets,” Bell said.

Those who have defined benefit pension plans should generally opt for monthly payments instead of a lump-sum payout, Bell said, noting that other financial planners might disagree. He’s seen too many retirees rapidly go through their one-time payout.

“It’s very intoxicating to have all that money at once. You can quickly run through a lot of money,” he said.

Perhaps the biggest challenge for new retirees is to temper worry with logic, said Jim Nolte, a financial planner and stock broker in Fort Myers.

“If you are heavily weighted in tech stocks, you made a mistake. You need to correct it immediately,” said Nolte, who manages the Fort Myers office of A.G. Edwards. “If you have quality issues, the best advice is to do nothing.”

Do nothing? Nolte admits that’s not easy for some investors.

“Psychologically, they just can’t do it,” he said. “Some investors from a psychological point of view just cannot stand the uncertainty.”

Nolte and Bell both warned, however, that abandoning stocks entirely is a mistake for retirees. Financial planners no longer automatically recommend reducing the balance between stock and fixed income funds as workers approach retirement or advance into retirement.

“We do not advocate reducing the balance of equities in a portfolio as people near retirement as a rule of thumb,” Lassus said. “The percentage of equities really depends on what the individual needs to earn on their investments and what the cash flow needs are over time.”

Without a doubt, new retirees face short-term belt-tightening.

“We thought we might go to Alaska this year, but that’s not going to happen,” said Dianne Papaioannou, 57. “We are a little more careful about what we are doing.”

Though worried, the Papaioannous are not panicked.

“I’m not discouraged, but it’s a little unsettling. We have had worse ups and downs,” Dianne Papaioannou said. “We just look at it as, this too shall pass.”